April 26, 2012

Changing The Channel

Since our last blog on the mid-market, The Changing Landscape, there has been plenty of newness, but this time reflecting influences of an e-commerce boom, omni-channel retailing, and the idea of a “moving target” or mobile shopper. With so many companies shifting into omni-channel retailing, today, we’d like to discuss what they are doing to stand out in a crowded marketplace.

Timing is everything, especially for the likes of Gap Inc, American Eagle Outfitters, and Macy’s. Not only are they placing smaller orders in factories but postponing color and fabric decisions to the very last minute as well as reducing the overall time products spend in warehouses. So what’s causing this change of pace? Well, as demands from millennial shoppers strengthen, it’s all about selection, speed, and uniqueness. This has forced many retailers to trim their concept-to-store times from twelve months to about nine to six. Not to mention the rise in such brands as H&M, Zara, and Forever 21 has challenged the ability of traditional retailers to keep up in the world of fast fashion. So what are these fashion labels doing to not only satisfy the demands of Generation Y-ers but keep up with the competition?

photo via ADWEEK

We spoke about Generation Y, a few months ago, examining who they are and what they really believe in. As online shopping becomes more mainstream, from these Millenials to the Baby Boomers, more and more companies are upping their e-commerce presence. Research shows that many consumers use the internet as a way to check product availability, explore brands, and read reviews before actually stepping foot into the store itself. Not to mention, with today's technology, consumers can virtually try on clothing without ever entering into a dressing room. This growing comfort in shopping online and rise in price savvy consumers also puts more pressure on retailers to deliver a knowledgeable staff, a generous in-stock selection, and a pleasant in-store experience.

A major battle retailers are having with the universal access that the internet offers as well as increased comfort by consumers using it is the growing presence of "showrooming." Shoppers are getting smarter and extremely price conscious. With showrooming, shoppers scope out products in stores (with no obligation to buy) and then go online and compare prices to buy merchandise for less at sites like Amazon, which ultimately damages brick and mortar operations. The electronic industry is feeling the largest hit from this issue and is fighting back. For example, Walmart now ships to its stores so customers can avoid shipping fees and Best Buy price matches competitors web prices. However, how to actually combat this issue is going to be difficult as online only companies continue to grow and expand product assortments.

While social media may only have a small influence on actual purchases, Pinterest has definitely been challenging retailers on how to capitalize on the ever-so-popular digital pin boards. Pinterest is the largest growing social platform ever and it is taking over the way we shop by "socially sharing" products. We discussed Pinterest previously and the question of how retailers were actually going to make money using the site. And, by the looks of it, a few companies have started to figure out how to get visual and use the platform for not only promotional purposes, but for potential profits. Sephora recently updated its website by incorporating the "Pin It" button on all of its 14,000 products and the site actually crashed. Both Ebay and Amazon have also added these "Pin It" buttons to their product pages. We'll be watching to see how visual profits get as more and more companies start to "pin" their individual product assortments.

photo via pocketlint.com

Spotify, a music streaming site and another platform extremely popular with Millenials, is teaming up with Coca-Cola in hopes to go well, everywhere. The music sharing platform is not only looking to attract more paying subscribers, but reach a global presence. Together the two brands hope to create new experiences for users by collaborating on music related projects and promotions and combining there branding.

photo via styld.by

Gap's got style as its partners with bloggers from FabSugar, Refinery29, and Lookbook.nu to create the site styld.by. Bloggers take Gap's spring 2012 merchandise and create looks to inspire shoppers, allow them to share with friends or purchase online. This strategy not only creates a "cool" factor, but puts Gap out there in the digital arena as more than just a contemporary retailer.

photo via NY Times

So how else are retailers standing out in the endless virtual world of products? Well, by combining forces because companies are stronger in numbers (literally)! Nordstrom's and Bonobos, Walgreens and Drugstore.com and Walmart and Kosmix are just a few examples. Let's be honest, brick and mortar stores are losing their ground so instead, retailers are going after the digital marketplace. Looking at Nordstrom as an example again, last February they also acquired HauteLook, started introducing apps, and offering same-day shipping to compete with other retailers and set themselves apart. 

photo via H&M

Looking at H&M, who recently released their third annual sustainable collection as well as published their Conscious Actions Sustainability Report this month, transparency has become a major focal point for the company. This time around, despite the super low price points, H&M seems much more conscious of how they are marketing the collection by merchandising conventional pieces with eco-friendly ones. A summary of the report highlights how H&M has established themselves as the biggest user of organic cotton in the world. As H&M reaches new improvements and accomplishments in the sustainability sector, we predict they will eventually establish themselves as the first known sustainable leader in the apparel mid-market.

photo via WWD

For our March MBF Picks, we discussed how Macy's import promotion, "Brasil: A Magical Journey," captured the hot topic of Brazil and stood out in the marketplace by focusing on an international concept. With J.C. Penney's new vendor and merchandising strategies causing a stir, Macy's has as a result begun a $400 million renovation of its Herald Square flagship, the largest in history. The 154-year old department store will incorporate fast changing technology while still preserving its historic essence through interactive store directories, mobile apps, digital product information, enhanced signage, and live video feeds to capture the buying power of the younger market. More details of the renovation include the creation of the world's largest women's shoe department, bringing in more luxury brands, and expanding their e-commerce potential. Macy's is particularly interested in this younger market and is not only looking to build better relationships in the store, but think locally in terms of products as well by offering experienced staff, locally targeted marketing messages, and more exclusive items.

photo via WWD

While Macy's bold transformation of more is more is underway, J.C. Penney looks to simplify as the major changes announced in the press are already in effect. From merchandise to fixtures, J.C. Penney is looking hip and refreshed. The retailer has already made efforts to revamp their product assortment by accepting applications from vendors seeking to sell product starting next spring. The entire store is going to be reformatted to give it a boutique-like feel and creating "the street" and "the square" to direct shoppers to brand presentations and demos. Not only are they moving towards the idea of "everyday low prices," but completely restructuring their pricing and tag system. In addition to this, the retailer features a color of the month with special sales on items with that tag color (April's color is teal incase you were wondering)! For us, this color system sounds familiar and reminds us a bit of how Apple introduced the nano-chromatic iPods years ago as well as their other color themed products and campaigns. With Ron Johnson at the head, how will J.C. Penney incorporate Apple's strategies next?

As the mid-market continues to experiment with innovative concepts and use technology as leverage to reach Millennial shoppers, attitudes and expectations will challenge retailers to change the channel. In general, brick and mortar operations will probably never completely fade out. However, the presence of the digital world is making a huge impact on the way we are shopping as more and more companies transition to omni-channel retailing. The idea of the department store is changing overall, especially as both J.C. Penney and Target introduce new boutique-inspired concepts and Macy's explores with technology. Whether it's taking full advantage of the internet and technology, repositioning oneself in the market, renovating, re-merchandising, or even moving towards a more sustainable product assortment, it will be interesting to see what will become of the mid-market in general as the entire industry is under major peer pressure to change. 


  1. One of the best articles I've read to date on the retail landscape. Thanks for sharing!

  2. I love what JC Penny's doing. I think it's spot on.

  3. So who's monitoring how sustainable these guys really are?!


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