The retail environment in the US is improving and though not all companies have seen growth, the optimism is palpable. Among the concepts that have really shown growth is e-commerce. According to eMarketer, B2C e-commerce sales in the US will grow 12 per cent to US $ 384.80 billion in 2013 – after growing 13.8 per cent to US $ 343.43 billion last year – as average B2C e-commerce sales per user reach US $ 2,466 this year among those who buy goods online in the US. With the economy still taking its time to consolidate and unemployment still high, the focus of retailers is on tightening the inventory and offering products that customers really want. While few companies were able to get the strategy right, some namely JCPenney and A&F could not impress the shoppers. In fact, JCPenney is a case study on how bad execution of a restructuring initiative can cause huge damage to both image and sales of a company. Moving ahead, most retailers are positive and international expansions, e-commerce and fresh merchandise offering is on the cards for most. 10 top retailers from the US are analyzed, and the outcome is almost identical to the issues of retailers worldwide…
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“We have gained market share from our competitors, and we remain fully dedicated to continuous improvement in 2013 and the years ahead.” – Terry J. Lundgren, Chairman, President and Chief Executive Officer
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Macy’s growing as an ‘omnichannel’ store
Under the umbrella of Macy’s – the two concepts Macy’s and Bloomingdale’s have moved beyond the meaning of “department store” in the traditional sense of the word and today, the brands are quickly earning the right to be called “omnichannel stores, which implies that the stores, websites and mobile devices are all working in unison – and seamlessly behind the scenes – to the benefit of the customer. The company made a big leap in 2012 when they equipped 292 Macy’s stores to fulfil orders placed online or at other stores that may have been sold out of a particular item. This was up from just 23 fulfilment stores in 2011. The company will be adding another 208 stores with fulfilment capability in 2013, which will bring the total to 500 by the end of the year. The aim is to make all assortments available to every customer, to drive incremental sales, increase inventory turns and improve gross margins.
[bleft]The company made a big leap in 2012 when they equipped 292 Macy’s stores to fulfil orders placed online or at other stores that may have been sold out of a particular item. This was up from just 23 fulfilment stores in 2011. The company will be adding another 208 stores with fulfilment capability in 2013, which will bring the total to 500 by the end of the year.[/bleft]
Driving sales through omnichannel stores, top line sales rose by more than US $ 1 billion for the third consecutive year. In fact, total sales in 2012, at US $ 27.7 billion, were about US $ 4.2 billion higher than in 2009. In the meanwhile, comparable sales rose by 3.7 per cent in 2012, on top of increases of 5.3 per cent and 4.6 per cent in 2011 and 2010, respectively.
Macy’s in 2012 launched a new strategic approach to customers in the Millennial generation. Millennials are the segment of customers who are aged between 13 and 30. They are now America’s largest generation and are the ones who spend more than US $ 65 billion on the kind of merchandise sold by Macy’s, representing a major opportunity for the company today and down the road. In 2012, the Millennial teams from various disciplines – including Merchandising, Planning, Marketing and Private Brands – were brought together into new open-concept office space in New York City so they could work more collaboratively, create new ideas and move quickly on key projects. Beyond the new and expanded merchandise assortments in 2013, Macy’s is now working on a new Home strategy for Millennials.
Kohl’s looking at private and exclusive brands as drivers
With a mix of merchandise that includes 48 per cent national brands and 52 per cent private and exclusive brands, it is the private and exclusive brands that are driving sales at Kohl’s and are a key contributor to gross margin. The company believes that since they have significant control over the production and manufacture of these brands, there is more pricing flexibility. “Private brands represent the absolute best value in our stores. They are competitively priced to meet or beat our competition, well made and durable, versatile, can be worn for years to come, also can be used for multiple wearing occasions, most importantly for the current fashion styles and trends,” says Mansell.
The strategic initiative at Kohl’s include new brands and improving upon merchandise content. DesigNation is a new limited-edition collection concept featuring fashions based on international inspiration from different premier designers. The first DesigNation collection was launched in November 2012. It was designed by Narciso Rodriguez and was inspired by his recent travels to Istanbul. The collection features misses’ apparel including outerwear, dresses, skirts, pants and shirts. The Derek Lam collection is expected to launch in April 2013 and will feature misses’ apparel and swimwear inspired by Lam’s travels to Rio de Janeiro, Brazil. Princess Vera Wang, which launched in July 2012, was designed with Vera Wang and features playful yet sophisticated apparel, jewellery, handbags and shoes. Rock & Republic, which launched in February 2012, is an authentic luxury brand and represents a lifestyle that is aspirational and appealing to many.
[bleft]“In 2012, we celebrated our 50th year of operations and opened our fourth e-commerce fulfilment centre.” Kevin Mansell, Chairman, President and Chief Executive Officer[/bleft]
Another major initiative at Kohl’s is “Concept to Customer” – This initiative is focused on increasing speed-to-market and allows the company to develop and deliver products quicker, while meeting customers’ needs and remaining on trend. Three years ago, it took 45 weeks from the start of development to the time product was delivered in store. As a result of this initiative, the cycle time is now 20-32 weeks, with the fastest brands delivering in 12 weeks and reorders in 4-6 weeks.
Store count increased in 2012 to 1146 from 1127 in 2011, Kohl’s is looking to increase the count to 1155 by the end of 2013. The confidence to expand comes from good financial results with net sales up from US $ 18.8 billion in 2011to US $ 19.3 billion in 2012.
GAP Inc. positioned to be the world’s favourite for American style fashion
With a mission: To be the world’s favourite for American style, GAP Inc.’s performance over the past 12 months demonstrated a successful balance of improving key financial metrics while making considerable inroads in the global expansion of portfolio of brands. This combination enabled GAP to increase revenue in 2012 by US $ 1.1 billion, an outstanding achievement. A continued focus was on the online, outlet and international businesses. Sales from direct stores grew 24 per cent and nine more franchise countries, matching the most in any single year, were added, taking the fleet of franchise stores over 300.
GAP now has more than 40 stores in China. In Japan, they launched both e-commerce channel as well as the first Old Navy store abroad. In North America, Athleta stores expanded to 35 locations, while Piperlime, with its online selection of curate, on-trend product from hundreds of labels, tested its first store concept in New York City. The company ended the year by acquiring multi-brand retailer, Intermix, to compete in the rapidly-growing luxury and contemporary market.
[bleft]“Our definition of success: Offering amazing products across our portfolio of brands that customers can’t live without.” – Glenn Murphy, Chairman of the Board and Chief Executive Officer[/bleft]
All of these investments were layered on the foundation of an improved domestic business. Most of all, through 2012 the company was successful in offering compelling, covetable apparel and accessories, at a time when customers are looking for more original, authentic product, GAP brands found the ideal mix of style, quality and price that positioned them to win in the marketplace.
Executing the strategic plan translated into excellent results. Net sales rose to US $ 15.7 billion, up eight per cent over the previous year. Going forward, the American clothing retailer has unveiled its five-year strategy. While pursuing expansion in Latin America, GAP Inc. plans on closing in on untapped potential in Asian markets, preparing the launch of Old Navy, following GAP’s Asian success. It will consider building upon its success in China by exploring and adding company-operated Old Navy and Banana Republic stores in the market. “Over the next five years, key to our continued success will be pushing the envelope further to make shopping seamless to customers through our digital strategy, while seizing the opportunity for Old Navy in many untapped international markets,” said Glenn Murphy.
The Children’s Place executing strategy for operational excellence
As of February 2, 2013, The Children’s Place operated 1,095 stores throughout North America, as well as online stores. Taking cautious steps, during Fiscal 2012, the company opened only 64 stores compared to 88 in Fiscal 2011, but closed 18 stores in Fiscal 2012, compared to 34 in Fiscal 2011. Also in Fiscal 2012, we expanded into international markets through territorial agreements with franchisees.
The company has set out four key growth initiatives for 2013, which they are executing:
1. Product – The company delivered strong and consistent product execution during Fiscal 2012 and is now focused on improving all critical elements supporting the end-product, including Product Development, Sourcing, Inventory Management, Logistics and Distribution. The goal is to get the highest quality, lowest cost, trend-right merchandise, and to more quickly and efficiently distribute it to the appropriate channel to drive sales productivity.
2. Brand – The company is focused both on increasing loyalty and share of wallet among current customers, as well as outreach to potential new customers to build brand equity and drive traffic.
3. Geographic Expansion – The company increased square footage in North America and began expanding into international markets during Fiscal 2012. We are developing an integrated strategy for e-commerce on a global basis.
4. Operational Excellence – The company is highly focused on operational excellence to support our other strategic initiatives. Operational excellence includes how we operate our stores, our IT infrastructure, Finance, Legal, Human Resources and Compliance.
[bleft]“Our store growth plan for Fiscal 2013 consists of opening approximately 55 new The Children’s Place stores.” –Jane Elfers, President and Chief Executive Officer[/bleft]
Another major goal is ‘Low-Cost Sourcing’, for this the company controls the substantial majority of the design, sourcing and production of The Children’s Place branded products directly. We believe that this control is essential in assuring the consistency and quality of our merchandise, as well as our ability to deliver value to our customers. We are strengthening long-standing relationships with our most important vendors. Through these relationships and our extensive knowledge of low-cost sourcing, we are able to offer our customers high-quality products at value prices. Our sourcing offices in Bangladesh, China, Hong Kong and India allow us to capitalize on new sourcing opportunities, increase our control over product quality, communicate efficiently and respond to changing business needs effectively,” says Elfers.
Sears sees growth in apparel business
The apparel business of both Sears and Kmart improved in 2012, helped by declining cotton prices, improved assortments and better inventory management. Since both Sears and Kmart Apparel are significant users of real estate space, improving the productivity of each business is essential to the goal of using company’s assets effectively. The company recently announced the development of two new apparel lines in collaboration between SHOP YOUR WAY, Sears’ social commerce platform, and the Kmart format. The company that has a long heritage of building celebrity brands, both at Sears and Kmart in 2012, chose to partner with Nicki Minaj and Adam Levine for this collaboration because of their creativity, their global appeal and their strong interest in developing their clothing brands in a unique and innovative manner.
The company claims to have managed inventory much more effectively in 2012. “Our peak inventory and average inventory balances were significantly below prior years, allowing us to demonstrate more financial flexibility and a margin of safety to our vendors. We expect to make further progress in 2013, and have a number of work streams designed to improve our productivity and lower our financial risk. Adapting our supply chain to buy what Members want, when they want it, rather than accumulating inventory which depends upon promotional pricing to sell,” says Lampert.
[bleft]“Sears Holdings made progress in 2012, improving the profitability of our business, but we know there’s more work to be done in 2013.” Edward S. Lampert, Chairman & CEO [/bleft]
The focus continues to be on our core customers, our Members, and finding ways to provide them value and convenience through Integrated Retail and our SHOP YOUR WAY Membership platform. We have invested significantly in our online e-commerce platforms, our Membership rewards program and the technology needed to support these initiatives.
Despite decent improvement in apparel business, Sears domestic’s comparable store sales declined 1.4 per cent for the year 2012; while Kmart’s comparable store sales declined 3.7 per cent for the year. Sears Canada’s comparable store sales declined 5.6 per cent for the year.
JCPenney failing to execute restructuring strategy successfully
At the beginning of 2012, JCPenney announced plans to become America’s favourite store by creating a specialty department store experience. During the first year of transformation, the retailer focused on building a new foundation for the future by reimagining all aspects of the business, including product, presentation, pricing and promotion. In the meanwhile, the company made substantial changes in the merchandise and continued to edit and introduce more global brands into merchandise assortment.
However, sadly, the plan has backfired and the management admits that the strategies to transform business may not achieve the improvements expected in the operating results. “We are executing a number of strategic initiatives as part of our transformation, including changes in our pricing strategy, corporate branding, marketing, store layout and merchandise assortments. During this transition period, changes to our pricing and marketing strategies have resulted in a prolonged decline in sales and our results of operations have been significantly below our expectations. It may take longer than expected or planned to recover from our negative sales trends and operating results, and actual results may be materially less than planned. As certain of these strategic initiatives such as the Shops and the Street are focused on our largest stores, they may not have the same impact on all of our stores. We may need to adjust any one or more of these strategic initiatives depending upon our customers’ reactions to and acceptance of these initiatives. Any changes to our strategies could be substantial, and if implemented, could result in significant additional costs. Adjustments may also create confusion among our customers, divert management and employees’ attention from other business concerns or otherwise disrupt our business. There is no assurance that our pricing, branding, store layout, marketing and merchandising strategies, or any future adjustments to our strategies, will improve our operating results,” says a management statement from the retailer.
[bleft]The retailer has a diversified supplier base, both domestic and foreign, and is not dependent to any significant degree on any single supplier. Many of these suppliers have done business with JCPenney for many years and they are looking at this supplier base to support them during this difficult time. [/bleft]
One of the strategic initiatives is to transform the largest stores into a collection of shops showcasing major apparel and brands. “Our goal is for our transformed merchandise and brand image to expand our customer base while continuing to appeal to our traditional, core customer,” says top management. For 2012 sales were US $ 12,985 million, a decrease of 24.8 per cent as compared to 2011. Comparable store sales decreased 25.2 per cent for 2012.
The retailer has a diversified supplier base, both domestic and foreign, and is not dependent to any significant degree on any single supplier. “We purchase our merchandise over 2,500 domestic and foreign suppliers, many of which have done business with us for many years and we are looking at this supplier base to support us during this difficult time.”
A&F growth through international expansions
Abercrombie & Fitch Co. (“A&F”) is a specialty retailer that operates stores and direct-to-consumer operations. Through these channels, the company sells a broad array of products, including: casual sportswear apparel, including knit and woven shirts, graphic T-shirts, fleece, jeans and woven pants, shorts, sweaters, and outerwear; personal care products; and accessories for men, women and kids under the Abercrombie & Fitch, Abercrombie Kids, and Hollister brands. The company also operates stores and direct-to-consumer operations offering bras, underwear, personal care products, sleepwear and at-home products for girls under the Gilly Hicks brand. As of February 2, 2013, the company operated 912 stores in the United States and 139 stores outside of the US.
During Fiscal 2012, the company sourced merchandise through approximately 155 vendors located throughout the world; primarily in Asia and Central and South America.
[bleft]“The growth strategy largely depends on the opening of new international stores.” – Michael S. Jeffries, Chairman and Chief Executive Officer[/bleft]
The growth strategy largely depends on the opening of new international stores. This international expansion has placed, and will continue to place, increased demands on operational, managerial and administrative resources at all levels of the company. “These increased demands may cause us to operate our business less efficiently, which in turn could cause deterioration in the performance of our existing stores or could adversely affect our inventory levels,” says Jeffries.
The company had net sales of US $ 4.511 billion for Fiscal 2012, an increase of 8 per cent from US $ 4.158 billion for Fiscal 2011. Operating income for Fiscal 2012 was US $ 374.2 million, which increased 69 per cent from the Fiscal 2011 operating income of US $ 221.4 million. Going forward, the company plans to revisit their operating model and identifying processes and investments they make in the business that may have had a return in the past but no longer do today. A cross-functional team has been created to simplify processes, eliminate low-value added components of our model, increase efficiencies and lower expenses. Secondly, A&F will be seeking to identify ways to increase average unit retail, particularly in the US stores and US direct-to-consumer operations.
Walmart committed to invest in ‘Made in USA’
With major expansions in the last decade, Walmart has shifted its focus from expanding stores to improving store productivity. The retailer is also looking to open smaller format stores in the urban areas, and has increased its focus on social media and technology to attract more customers. For the first time since it began online sales in 2000, Walmart broke out its e-commerce goal, setting company targets worldwide for online sales of US $ 9 billion by fiscal 2014.
Topping Walmart’s goals this year are commitments to reinvest in American manufacturing and employing of thousands of veterans and more workers in general to help lower the nation’s still-high unemployment rate also. The retailer has committed to buying an additional US $ 50 billion in USA made products over the next decade. The strategy is growing US manufacturing on two fronts: by increasing what they already buy in the US such as basic apparel, sporting goods, games and paper products, as well as by helping suppliers to bring “on-shore US production in high-potential areas like home textiles, furniture and pet supplies.
[bleft]“With the addition of US $ 22 billion in net sales, we are now a US $ 466 billion company.” – Michael T. Duke, President and Chief Executive Officer [/bleft]
A very sustainable company, Walmart recently announced its goal to eliminate greenhouse gas emissions in both its supply chain and its retail stores. In line with this, the company has begun installing solar power systems in Walmart stores and Sam’s Clubs throughout Ohio and Hawaii. Walmart expects that this plan will help reduce energy use and drive efficiency, making its business stronger and more competitive. Aside from this, Walmart continues to monitor macroeconomic conditions to fully assess the right pricing strategies in its stores. The company’s continued investments in e-commerce and international markets may also help drive growth and improve returns.
J.Crew clothing the elite with increased visibility
J.Crew Group, Inc. is a nationally recognized multi-channel retailer of women’s, men’s and children’s apparel, shoes and accessories. As of March 20, 2013, the company operates 296 retail stores (including 240 J.Crew retail stores, eight crewcuts stores and 48 Madewell stores), jcrew.com, jcrewfactory.com, the J.Crew catalog, madewell.com, the Madewell catalog, and 106 factory stores.
In 2012, J.Crew opened a flagship store on London’s Regent Street, the first outside of North America. Yet, unlike other retailers expanding abroad to mitigate slow domestic growth, J.Crew is expanding steadily in the US as well, as sales and margins increase. Forty-two new stores in North America bring its count to around 400. To test international markets, the company ships online orders to more than a hundred countries. China, Japan and Australia are among top e-commerce market tests that may soon have their own J.Crew stores. Methodical in its growth plans, J.Crew is protecting its brand while still spurring growth.
Among the most sought-after brands in America today, with Michelle Obama wearing the brand at public functions, the brands has tasted success over the last few years, In Fiscal 2012, J.Crew Group’s revenues increased 20 per cent to US $ 2,227.7 million with comparable company sales increasing 13 per cent. Comparable company sales increased 3 per cent last year. Store sales increased 21 per cent to US $ 1,546.6 million. Store sales increased 7 per cent last year. Direct sales increased 19 per cent to US $ 651.5 million following an increase of 11 per cent last year.
ANN INC. offering more fashion to engage shoppers
The strategy for growth at ANN INC. includes offering more fashion in more stores, adding more selection at “approachable” price points, becoming more surgical in promotional activities and providing the customer with a more engaging shopping experience. As a result of these initiatives, the brand was successful in driving significantly higher profitability on a comparable sales increase of 1 per cent for 2012.
[bleft]“During 2012, we implemented a multi-part strategy to drive higher sales, productivity and profitability from this iconic lifestyle brand. And, we are achieving positive results!” Kay Krill, President & CEO[/bleft]
As the strategic initiatives played an integral role in finding success in 2012, ANN INC. is hopeful that the same will continue to contribute to growth in 2013 and beyond. These strategies are enabling the company to expand the reach of their brands, to attract new clients and to interact with our existing clients in new ways. This, in turn, is providing opportunities to increase sales, productivity and profitability across our business. Specific focus is on:
• Continuing to grow e-commerce business – As part of growth strategy in 2013, ANN INC. recently launched international shipping to more than 100 countries worldwide. This is a key step forward as the company continues to build the online business and to expand the global reach of both brands. In addition, selling internationally through e-commerce will provide further insight as to where significant demand exists outside of the US, to consider future opportunities.
• Expanding multi-channel initiative – The objective is to offer seamless access to inventory no matter where the customer is sitting. During 2012, ANN INC. launched the first phase of their multi-channel initiative, which is enabling them to fulfil online orders with inventory located in the stores. Though in the early stages of this initiative the company believes it represents a significant opportunity in the years to come.
• Executing real estate strategy focused on enhancing the productivity of store fleet at both brands, while expanding presence to new markets. In total, the company opened 63 new stores in 2012. With these significant initiatives Ann Inc. is positive of the year ahead.
