35%, 25%, and $20 an Hour:

Demographics, Destiny, and the Great Evaporating American Middle

 Reading this morning about Walmart, and eight quarters in a row of comp-store declines.

 Reading last week about Sears Holding, with annual revenues down from $53B to $43B in five years.

 Reading recently about Gap Inc., with US sales down 32% since 2004 in its US Gap-branded stores.

 And – reading a few weeks ago (The Economist, 30 April) about the decline in employment among US men – blue collar men in particular.

 According to the US Bureau of Labor Statistics, the EOM April unemployment rate for US adult men was 8.8%.

 However (as The Economist points out), the unemployment rate for US 25-54 year olds without a high school diploma is nearly 35% – up from around 10% in the 1960s. Of those with a high school diploma  but no college, today’s unemployment rate is almost 25% – up from less than 5% in the 1960s.  

 The odds are that neither group will find work at pre-recession levels. In each of the past recessions, the percentage of poorly educated men in work has fallen sharply – and not recovered to prior levels economic expansion returns.  

 Or, if they do find work, the odds are that the job will pay less than before.  According to the Bureau of Labor Statistics, the percentage of workers at $20 or more-per-hour jobs in the United States – a wage rate equivalent to at least $41,600 per year – declined more than 20% from 1979 to 2007.

 Don’t get me wrong.   There are dozens of reasons why Walmart, Sears, and Gap Inc. are in the situation they’re in.

 But demographics is destiny.  

 As a retailer, you can change assortments, beat up vendors, and find new merchants.  You can open and close new formats and rapidly expand your presence on the internet.   God forbid, you can even hire consultants and change logos.

 But if the personality of your brand is irrevocably wedded to the great American middle, and that great American middle is evaporating before your eyes, there’s going to be a problem.

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Tags: male unemployment, middle class, retail, retail strategy, retailing, unemployment

Less than a Third, and Less than Half.

I was reminiscing with a friend recently about NRF shows past, and the graveyard of consumer-facing retail technology ideas.

Yikes. Lots of ghosts. Even a few zombie ideas that refuse to die (cart tablets, anyone?). The big question is why – with the exception of self-service – have so few new “breakthrough” ideas found acceptance?

Here’s a hypothesis: Caught in an ever-fast cycle of innovation, the sales and engineering departments – understandably – always seek more. More headroom. More functionality. More interoperability.

We dream of the possible. We dream of platforms, of vendor lock-in, of recurring streams of high-margin revenue, of bosses pinning ribbons to our medaled chests. Ignore the cost implications for a moment.  (As grave as they may be, given the expense of rolling something out to all stores.)

Here’s what we too often forget: Shoppers dream of ease and simplicity.  

A 2009 McKinsey study on consumers’ use of electronics devices sheds some light on the matter.  Less than one-third of all consumers use the advanced features of any CE device – and less than one-half even know that the features exist.  

Allow those factoids to simmer for a moment. Think of the hours of brilliant engineering innovation that most consumers simply ignore -- that for most is too complicated, too complex. Brilliant engineering innovation that brings joy to the engineer, but immediate dismissive frustration from the consumer who simply wants to watch a movie.

Simplicity is the byword of the McKinsey paper. Simplicity in functionality.  Simplicity in usability. A quick glance, and you know how to use it and what to do.  A quick glance, and you know why it matters. The learning curve: a straight line north.

But it’s not just simplicity. Just as important is the usability – perhaps defined for retail as simplicity in context. Who’ll use it? When? Why? To what benefit? Consider the mother-of-two-in-a-hurry at the modern mega-grocery/mass retailer.  Consider, for a moment, the value of a cart tablet to her.  See wailing children pounding on the screen. Weep.

The very smart and always wise Bob Anderson, former CTO at Best Buy, points us to the “popcorn” button on the microwave as a perfect guide for consumer-facing technology.  No questions.  Immediate understanding of value.  One push and sixty seconds equals hot buttery-salted goodness.

Food for thought.

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Tags: ease, innovation, retail, retailing, simplicity

 Recently my colleague Jon Stine, wrote on his blog In between the numbers – Big Changes for Stores about amount of retail square footage that is available today and the need for stores to evolve with changing consumer patterns.

This change is also reflected in shopping malls that needs to change to make the destination attractive to shoppers and for retail store operators.  In a recent trip to the local shopping mall in San Bruno, California, I noticed how the retail shopping mall has changed in the last few years to adopt to the new shopping trends.

httpv://www.youtube.com/watch?v=T5NIOrIOmhs

Some of the changes include:

• Mixture of services and store formats in the main mall aisles
• Use of vending machines to dispense higher end products such as cosmetics and electronics
• Integration of digital video inside the store and at the display window to draw traffic/interest
• Store exclusive offerings from personal appearances to store only merchandise that is not available online
• More services offering in the mall from child care to education and entertainment. Read More »

Tags: mall, retail, retailing, shopping

Maybe it’s because I grew up in the Midwest.   But I just don’t like writing checks to lawyers.

 I’ve lots of friends in the legal profession, and all are lovely people (well, most of them, anyway).

 But as the pragmatic sort, it pains me to spend money to resolve something that might have been settled at a lesser price well before.

 Which leads me to the topic of PCI.

 Just reviewed a 2010 study from the data security experts at The Ponemon Institute that looked at the post-incident cost of data breaches.  Forget, for a moment, the brand humiliation, the CEO news conferences, the critical whiplash in the blogosphere and throughout Facebook.  Ignore, for a moment, that research suggests that 30% of consumers who were victimized by retailer data breaches promise never to patronize the offending brand again.

 The Ponemon research found that 42% of all data breach incidents led to the involvement of a third party (there to provide additional, independent investigation, resolve disputes, and soak up consulting fees.)

 The average cost of that third party involvement in the United States was $1.52 million, with final resolution costs ranging from $750,000 to upwards of $31 million.   That’s on top of lost business estimated at $4.47M per incident.

 Total:  $6M.  Perhaps not fatal to a billion-dollar business, but not a check I’d like to request.

 Yes, I know that active, careful PCI compliance is no guarantee.   And that active, careful PCI compliance doesn’t put revenue on the top line.  And that there’s ongoing confusion about PCI for mobile.  And everyone thinks it’s all too expensive.  And on and on and on.

 But I also know this:  active, careful compliance reduces risk.  Significantly. 

 And that the price of risk is not just a bruised brand. 

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Tags: credit card, payment card industry, pci, retail, retailing, security, shopping

 I was talking with a friend the other morning about the strategy of a struggling retailer.

You could see his head shake, even over the phone.  “They’re getting eaten alive by Amazon in e-com, and Wal-mart’s taking away the low-end in chunks” he said.  “And they certainly can’t go premium.”

Yikes.   Another brand caught in the middle.    Two monsters below, and price resistance above.

Hmmm . . .

Maybe they can go premium.   Especially if we consider a new definition of the term.   

Most of the time, the words “premium” or “upscale” are used to describe an elevated  price point and a luxurious  customer experience.    Premium retailers sell more expensive goods.   They also offer such wonders as concierge-level service, discreet-yet- fashionable technology, and soap in the bathrooms. 

But maybe – just maybe – the new definition of premium retailing has less to do with luxury, and more to do with creating additional customer value  . . . the kind of value that creates lasting stickiness to the brand.

There’s a little independent running shoe store down the street that might be a poster child for this new definition of premium.   It’s maybe 2000 square feet.   Thin industrial carpet on the floor. 

The little running shoe store offers a standard good-better-best assortment of shoes, running apparel, and some new technology-based wizardry: a computer-aided analysis of your stride.   

Overall, quite nice, but not fancy.  Not “upscale” by any stretch of the imagination.

But the little running shoe store does more.  They recognize that what their customers really want to buy goes well beyond shoes, shorts, and gear.    They really want to buy 20 less pounds and a smaller dress size.  They really want to buy lower blood sugar levels.   They really want to buy new friends.  They really want to buy the pride of completing a marathon.  Or the high of a great workout.    

And so they organize  runs.  Walks.  Events.  Meets.  Gatherings.   Their product is an orchestration of the SKUs and services (stride analysis) and interest-centric activities, all under the brand banner of the little running shoe store.

Premium?  You bet.  Scalable to the big guys? 

I don’t think there’s a choice.

Tags: luxury, premium, retail, retailing, shopping