Customer Bob
 
What's Going On In the World Of Business In The Opinion Of Bob Connolly

 

 

 

 

         
 

2008 Issue 4

U.S. Retail 2008

Here we go again, yet another retail revolution.  By that I mean at the end of this revolution some will be gone, many will be smaller, and a few will be stronger and larger. 

Nothing new here.  We go through this cycle about every 15 years during some sort of national economic setback.  Not a lot to worry over for the consumer, we have too many stores anyway, and when this shake out is over, we will still have enough outlets to satisfy our conspicuous consumer appetite, and enough that there will still be competition.

I think there will be between 3000 and 5000 stores closed this year (not including local independents).  In most cases it will be a reduction of doors and in a few cases, such as Comp USA and Bombay Company, the business will go away altogether. 

The majority of the closings will most likely be shopping center and mall-based apparel, shoe and jewelry stores.  Most vulnerable are the moderate priced stores that are located in what we would call B or C level shopping centers. 

These stores depend on the center to drive traffic and then hopefully benefit from that traffic.  They do not usually have a great strategic position from either a merchandising or brand perspective. 

These stores often rely on low sales, low rent and high margins to make their way, and the slightest blip in any of these factors will cause them major problems. This year these stores on the bubble can depend on at least two of out of three factors going in the wrong direction  (sales and margin). 

Want to know who I think will close and who will have a major reduction in doors, sorry, for that I get paid.  But here is a tip.  Store X is on about 24 quarters of poor sales and profits, but is still around.  Why?  Examine their balance sheet and understand that they still have cash and access to cash. 

Now take a look at Store Y (a one time high profile category killer) and see that they also have had about 24 bad quarters, and look at their balance sheet. 

No need to look too far; their problems are not coming, they are here.   Interestingly both have strong brands and both can be fixed.  However this is not true for the death spiral scenario of many, weak balance sheet, mediocre brands and often management is in denial or without the imagination to react. 

So over the next few years when you walk the mall or strip center and you see an empty store front, you may say something like this.  “Oh, I remember that store, I think we were in there once, can’t remember if we bought anything, now what was its name?”  My point exactly.  

 

 

 

 

 

 

 

 

 

 

About Bob

Bob Connolly retired from Wal-Mart Stores, Inc. in 2006 where he most recently served as Executive Vice-President for both Merchandising and Marketing.

In 2000 Bob was named the first Chairman of the Center for Retailing Excellence at the University of Arkansas' Sam M. Walton College for Business.  In 2005, an endowed scholarship in retailing was established in Bob's name.  Bob co-authored "The Big Middle", published in the Journal of Retailing.

Bob now works both privately and in conjunction with the Center for Retailing Excellence, consulting and advising corporations and business groups worldwide on how to take advantage of trends, business analysis from the customer's point of view, and the miracles and missteps of branding.  Bob has worked with Disney Corp, International Resources Inc., Spectra and Massmart.

Bob serves on the Board of Directors for Husqvarna in Sweden and Ascendia Brands in the United States.  He travels extensively, giving him a first-person view of the ever-changing world of the consumer.  Bob publishes a monthly newsletter at www.customerbob.com

To arrange for Bob to consult with or present to your company, contact him at bob@customerbob.com

Customer Bob

 

 

 

 

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