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8A What’s It Worth?
The value equation isn’t just price, it’s value plus reason.
In addition, there’s been a change in the general ing has captured retail’s attention.
THE STORE
Frank Blake believes a downturn is a terrible thing
to waste.
ON TRACK
again.” Macy’s has been using the time to test and
refine its localization initiative, a program that
caters its department store offerings to local
shoppers’ tastes. The revamped stores, each with
a different layout, will be “prototypical instead of
a prototype.”
Driven off course by
Budget-conscious customers are no longer looking
short-term tactics,
for endless choices. They are also sticking to
stores are regrounding familiar brands. There is less patience for clutter,
and a stronger desire to simplify their lives and
themselves in the basics
consolidate their shopping trips. Retailers who’ve
of a great shopping picked up on this new dynamic have realized that
“less is more.” Some merchants are expected to
experience.
slice SKUs by at least 15%. A few of the largest
You would think that with all the belt tightening, retailers, such as Walgreens and Walmart, are
price competition and lack of trust, we’d find responding by reducing assortments in favor of
ourselves in an era of reduced expectations for those that are most relevant, a strategy that is
the store. In fact, it’s just the opposite. With lifting overall sales.
everyone competing fiercely on price, consumers
It includes ideas around purchase such as occasion, unique to the brand. Crucial, because without it a
quality, convenience, experience, current finances, brand’s power to create demand is diluted.
time, reputation, availability or rarity, taste,
Retailers are delivering value or “worth” in many
comfort and simplicity. When a shopper is at the
ways. For example, people are dining out less. This
shelf, the question he is most likely to ask himself
allows a grocer the chance to boost its category by
is not, “Is it the least expensive?” but “Is it worth
filling a different role, such as providing sugges-
the price?” And “worth” has come to mean “value”
tions on how to make a great dining experience in
plus “reason.”
the home. With consumer creativity, choice and
It’s retail’s challenge to articulate the reason to self-sufficiency at an all-time high, value must
buy. The solution is a balanced value proposition have a reason.
Apparel retailers forced to slash prices so drastically to get rid of inventory left people
questioning how much things should really cost. Venerable brands, such as Tiffany &
Co. and Hermes, are wooing shoppers with messages of fine craftsmanship, history and
heritage. Others are adding simpler, smaller versions of indulgent items to their mix in
order to make their customers feel comfortable.
Experts predict the global luxury market will begin stabilizing in the second half of the
year, resulting in a net decline of 10% overall for cosmetics, fragrances, apparel, jewelry,
watches and accessories. On the up side, a recent study reveals a trend among luxury
shoppers to remain loyal to their top-of-mind brands even though they are currently
switching to lower-price-point items.
The collapse of real estate rents and remodeled stores are allowing these largely
urban/rural/strip mall players to move into better suburban locations. Closeout
retailer Big Lots has added branded consumables to its mix, remodeled its store for
improved merchandise display and put in place a new organizational system for
getting deals quickly and easily onto the floor. It plans to open more stores in 2009
than it has in the last three years combined.
NEW
the acquisition of the 36-store men’s grooming
chain, The Art of Shaving, a destination that offers,
among other items, $150 razors. It will be interest-
PLAYS
though Staples’
same-store sales
dropped 8% in a
recent quarter, the
office products
superstore just
Even though resources introduced 25
exclusive co-branded
are limited and tension office products from
is high, there are signs OXO Good Grips that
cost up to fi ve times
of entrepreneurship more than the store’s own brand. The exclusive
and creativity. arrangement may yield strategic gains by differenti-
ating Staples from its rivals.
“Is anybody buying anything except food?”
That was the plaintive question asked by one retail Strength lies in flexibility.
expert who noted that food retailing seems to be the
Who knew the current climate was hospitable to
only recession-proof category. Consumables were
high-priced yoga pants? Vertically integrated
the strongest performers for supercenters, ware-
Lululemon Athletica is thriving with 113 stores and
house clubs and dollar stores. Target is expanding
plans for slow but steady expansion, thanks to its
its groceries to include about 90% of the SKUs found
success in an underserved market in women’s
in traditional supermarkets.
athletic wear.
Companies such as Zumiez, American Eagle Outfitters and Aéropostale are eyeing
opportunities in the volatile market, although American Eagle’s 28-unit apparel
concept, Martin + Osa, may not survive. Aéropostale closed Jimmy’Z but launched a
tween concept, P.S. from Aéropostale with a reported potential for 500 locations.
A concept like the Limited Group’s playful Pink brand resonates with its target more
effectively than many of the intimate apparel entries at the malls. Perhaps because
there are more aesthetic, rational and emotional dimensions associated with it.
Failure of many of the fashion retail concepts is being blamed on failure of niche
segmentation and the current squeeze on credit cards. The 2009 Most Valuable
U.S. Retail Brands report from Interbrand Design Forum suggests that there’s
not enough differentiation or defensible identity among brands. When you have
little to spend, there’s no reason to buy the high-priced polo shirt instead of a
lower-priced version with the right value equation.
Used Lululemon items have high You are known by the company you keep ...
resale value on eBay, where even or acquire.
its shopping bags, free in the store,
Amazon.com purchased online shoe retailer Zappos for
sell for $5.
$807 million to bolster its offering in apparel. T-Mobile
teamed up with RadioShack, now rebranding itself as The
Less continues to be more.
Shack, to sell phones and services in more than 4,000 of
Some retail experts are advising RadioShack’s stores where it joins Alltel, AT&T Mobility and
chains to close 5% to 20% of their Sprint Nextel. Toys “R” Us is now associated with a
stores and invest those resources in keeping the remainder premium brand through its purchase of FAO Schwarz. It
of the fleet healthy. For the past three years, OfficeMax also acquired eToys.com, babyuniverse.com and ePreg-
has been slowing the pace of its expansion but recently nancy.com to conquer more of the market and become the
opened three new smaller-concept stores called Ink Paper No. 3 toy retailer after Walmart and Target.
Scissors. Its 2,000-sq.-ft. format is cheaper, requires less
inventory and fewer employees. Downsized concept stores
not only allow companies to enter new markets, they feel
more personal, especially now when there is such a thing
as too much variety.
GIVE MY REGARDS
TO BROADWAY
JCPenney is in Herald Square.
Top retail talent has transformed J.C. Penney from its image
as a quality-and-value clothing store to a style destination with
exclusive fashionable private brands. One of Penney’s latest, the
“Joe” by Joseph Abboud men’s label, will be found exclusively at
the Manhattan store ahead of a nationwide launch. The flagship
expects to do big business for the retailer, potentially $90 million
annually once it hits its stride, providing healthy competition for
Macy’s across the square.
To make sure they’re true ambassadors of the brand, The Cheesecake Factory
holds daily meetings and tests its staffers regularly on their menu knowledge. Job
applicants are quizzed on Cheesecake culture before they are hired. Workers are
well trained and generously compensated. The goal is to have employee enthusi-
asm bubble up into customer enthusiasm. It must be working. The Cheesecake
Factory has become a billion-dollar chain, and part of its success can be attributed
to its brand engagement program.
WHERE’S THE
one store by an
estimated 15%.
RESET OR
RENAISSANCE?
Brand is the business
case for change.
They say you can’t learn from success. So if the
recession has accelerated the failure of mediocrity,
that’s arguably a good thing. It means there’s a lot
of learning going on right now.
12 Supervalu** 34,664,000 34,341,000 –2,315,000 1,550,000 2,421 Remodels planned for 75 to 80 stores this year, but
Eden Prairie, MN 2,474 that’s down about 50% from last year.
(S) 2/28/09
13 Rite Aid 26,289,268 24,326,846 –2,915,420 –1,078,990 4,901 Refinanced most of the debt that was to come due
Camp Hill, PA 5,059 in September 2010.
(DR) 2/28/09
14 Macy’s 24,892,000 26,313,000 –4,803,000 893,000 847 My Macy’s program of tailoring stores to match local
Cincinnati, OH 853 tastes is central to strategy to turn performance
(D,E, C) 1/31/09 around.
15 Publix Super Markets 24,109,584 23,193,590 1,089,770 1,183,925 993 Bulking up its enterprise data warehouse to keep
Lakeland, FL 926 pace with company’s growth and more complex
(S, CV) 2/27/09 analytical needs.
16 Staples 23,083,775 19,372,682 805,264 995,670 2,218 To enhance supply chain productivity, will use work-
Framingham, MA 2,038 force management software to support nearly 1,500
(HS, I,E) 1/31/09 DC workers.
17 Ahold USA** 21,835,000 20,996,000 934,000 875,000 711 Stop & Shop and Giant Food are expanding customer
Chantilly, VA 705 use of mobile handheld self-scanning devices.
(S, E) 12/28/08
18 Delhaize America** 19,222,000 18,293,000 996,321 957,511 1,594 Added a space-optimization tool to improve category
Salisbury, NC 1,570 and shelf performance chainwide.
(S) 12/31/08
19 Amazon.com 19,166,000 14,835,000 645,000 476,000 DNA Buying online shoe retailer Zappos.com for
Seattle, WA DNA $840 million.
(E,I) 12/31/08
20 TJX Cos. 18,999,505 18,336,726 880,617 771,750 2,652 Sold off Bob’s Stores last year. Agreed to multi-
Framingham, MA 2,529 million dollar settlement of data-theft investigations.
(AS, HS, I) 1/31/09
21 J.C. Penney✝ 18,486,000 19,860,000 567,000 1,105,000 1,093 Company returns to Manhattan, this time with an
Plano, TX 1,067 electronic queuing system to handle the Herald
(D, E, C) 1/31/09 Square crowds in store.
22 Kohl’s Department Stores 16,389,000 16,474,000 885,000 1,084,000 1,004 Close to 90 stores have or are slated to have solar-
Menomonee Falls, WI 929 energy generation power.
(D) 1/31/09
23 Alimentation Couche-Tard 15,781,100 15,370,000 3,900 189,300 5,443 In April agreed to acquire ExxonMobil’s 450-unit
Laval, Quebec 5,119 On the Run franchised c-store chain as well as
(CS) 4/26/09 43 company owned stores.
24 7-Eleven* 15,000,000 12,800,000 NA NA 5,680 200 new stores planned this year. Southern California
Dallas, TX 5,333 targeted for 100 new units over next three years.
(CV) 12/31/08
25 Gap Inc. 14,526,000 15,763,000 967,000 833,000 3,149 As part of its resuscitation plan, will remodel 50 Old
San Francisco, CA 3,167 Navy stores.
(AS, E, I) 1/31/09
26 H.E. Butt Grocery Co. 14,500,000 13,500,000 NA NA 338 Placed bill-payment and financial-services kiosks
San Antonio, TX 310 in 26 of its Texas-based stores.
(S,I) 10/31/08
27 Office Depot 14,495,544 15,527,537 –1,478,938 395,615 1,429 North American retail division sales percentage
Delray Beach, FL 1,370 contribution dropped for third year in a row, while
(HS, I, E) 12/27/08 international’s went up.
* Estimate ** Retail operations only; operating income reported *** Pro forma results
✝ Continuing operations DNA = Does not apply NA = Not available
AS = Apparel Specialty D = Department E = Electronic HS = Hard Lines Specialty SC = Supercenter
C = Catalog DS = Discount GM = General Merchandise I = International SH = Shoe Store
CV = Convenience Store DR = Drug Store HC = Home Center S = Supermarket WC = Warehouse Wholesale Club
Source: Company reports/Chain Store Age research/Chain Store Guides
47 Winn-Dixie✝ $7,281,000 $7,201,000 $13,000 $280,000 521 Computer-generated ordering system will automate
Jacksonville, FL 520 orders, optimize inventory and reduce out-of-stocks,
(S) 6/25/08 and new POS scanners speed up checkout process
and age-verification compliances when scanning
shoppers’ driver’s licenses.
48 Bed Bath & Beyond 7,208,340 7,048,942 425,123 562,808 1,037 One sign that consumer spending remains difficult —
Union, NJ 971 first-quarter 2009 coupon redemptions were up.
(HS) 2/28/09
49 Racetrac Petroleum* 7,000,000 5,800,000 NA NA 533 4,000-sq.-ft. c-store carries more than 4,000 SKUs.
Smyrna, GA 525
(CV) 12/31/08
50 Dillard’s 6,988,440 7,370,806 –241,065 53,761 315 This year off to a better start in first quarter from
Little Rock, AR 326 improved inventory management, expense reduction
(D) 1/31/09 and cash conservation.
51 Family Dollar Stores 6,983,628 6,834,305 233,073 242,854 6,571 Tough economic times driving more consumers to
Charlotte, NC 6,430 its stores, so third-quarter profits jumped 36% over
(DS) 8/30/08 a year ago.
52 AutoZone 6,522,706 6,169,804 641,606 595,672 4,240 Bucking the trend, earnings up 5.8% through the first
Memphis, TN 4,056 three quarters of this year on a 6.3% sales gain.
(HS, I) 8/30/08
53 Ross Stores 6,486,139 5,975,212 305,441 261,051 956 Continues to take advantage of huge buying
Pleasanton, CA 890 opportunities for closeout merchandise.
(AS) 1/31/09
54 Aldi* 6,250,000 6,000,000 NA NA 1,000 Plans to open 80 stores this year including its first
Batavia, IL (S) 1/31/09 900 in New York City.
55 Hy-Vee 6,200,000 5,600,000 NA NA 224 A move into Wisconsin is under way.
West Des Moines, IA 224
(S, DR) 9/30/08
56 Trader Joe’s* 6,000,000 5,400,000 NA NA 305 Ranked second-best supermarket chain by Consumer
Monrovia, CA 297 Reports, and second in customer service by MSN
(S) 6/30/09 Money, but Greenpeace unhappy with its sustainable
seafood policy.
57 Defense Commissary Agency 5,813,245 5,537,505 NA NA 273 Stores in the East record sales about 20% higher
Fort Lee, VA 277 than their western counterparts.
(S) 9/30/08
58 Blockbuster 5,287,900 5,542,400 –374,100 –73,800 7,405 Will rent and sell movies and TV shows through
Dallas 7,830 TiVo’s digital video recorders in the second half of
(HS. I, E) 1/4/09 this year.
59 Foot Locker✝ 5,237,000 5,437,000 –79,000 43,000 3,641 Brought in Ken Hicks, J.C. Penney’s president and
New York, NY 3,785 chief merchandising officer, to become its president
(SH, AS, I, E, C) 1/31/09 and CEO.
60 Advance Auto Parts 5,142,255 4,844,404 238,038 238,317 3,368 To improve inventory control and customer
Roanoke, VA (HS) 1/3/09 3,261 satisfaction, added predictive analysis software.
61 Barnes & Noble 5,121,804 5,286,674 75,920 135,799 778 Even as it scales back store openings, advances
New York, NY 798 digital platform with plans for free WiFi in all stores,
(HS, E) 1/31/09 a new e-book store and an application for the Apple
App Store.
62 Save Mart* 5,100,000 4,600,000 NA NA 245 Using an open-source database to manage the time-
Modesto, CA 248 and-attendance application for its more than 20,000
(S) 3/31/09 employees.
63 PetSmart 5,065,293 4,672,656 192,670 258,684 1,112 Slowing expansion — will open 40 to 42 retail stores
Phoenix, AZ 1,008 and 20 PetsHotels this year.
(HS, E) 2/1/09
64 WaWa* 5,050,000 5,000,000 NA NA 569 Almost 29% of the company is owned by workers
Media, PA 576 through an Employee Stock Ownership Program.
(CV) 12/31/08
* Estimate ** Retail operations only; operating income reported *** Pro forma results
✝ Continuing operations DNA = Does not apply NA = Not available
AS = Apparel Specialty D = Department E = Electronic HS = Hard Lines Specialty SC = Supercenter
C = Catalog DS = Discount GM = General Merchandise I = International SH = Shoe Store
CV = Convenience Store DR = Drug Store HC = Home Center S = Supermarket WC = Warehouse Wholesale Club
Source: Company reports/Chain Store Age research/Chain Store Guides
Abercrombie & Fitch $3,540,276 1,125 Military Exchange System $12,725,592 4,028
Abercrombie & Fitch 1,531,480 356 Army/Air Force (AAFES) 8,876,580 3,100
Hollister 1,514,204 515 Navy (NEXCOM) 2,648,317 543
Abercrombie 420,518 212 Marine Corps (MCX) 885,626 151
RUEHL 56,218 28 Veterans Canteen Service (VCS) 180,000 172
Gilly Hicks 17,856 14 Coast Guard (CGES) 135,069 62
Source: Company reports/Chain Store Age research * Estimate DNA: Does not apply
DEPARTMENT STORES
Fiscal 2008 % % Change Operating Average % Change Operating
Year Sales Change Operating Income as % Sales per Comp- Income as % of
Company End (000) Sales Income of Sales Store Stores Total Assets
Belk 1/31/09 $3,499,423 –8.5% –40.9% 3.5% $11,473,518 –8.7% 4.8%
Bon-Ton 1/31/09 3,129,967 –7.0 –58.8 2.0 11,158,528 –7.4 3.4
Dillard’s 1/31/09 6,830,543 –5.2 –97.1 0.1 21,312,147 –7.0 0.2
J.C. Penney 1/31/09 18,486,000 –6.9 –33.0 8.2 17,116,667 –8.5 12.7
Macy’s 1/31/09 24,892,000 –5.4 –41.6 4.9 29,284,706 –4.6 5.5
Neiman Marcus* 8/2/08 4,600,500 4.8 –0.2 13.5 71,325,581 1.7 NA
Composite 2008 61,438,433 –5.4 –36.9 5.8 21,182,014 — 7.1
Notes: Operating income is defined as sales less cost of goods sold less selling, general and administrative expenses and store opening/closing expenses.
Average store sales is computed by dividing sales by the average number of stores open at the beginning and end of the fiscal year. *Department stores only NA = Not available
Source: Company reports/Chain Store Age research
DRUG STORES
Fiscal 2008 % % Change Operating Average % Change Operating
Year Sales Change Operating Income as % Sales per Comp- Income as % of
Company End (000) Sales Income of Sales Store Stores Total Assets
CVS Caremark Corp. 12/31/08 $48,989,900 8.7% 29.4% 7.1% $7,409,241 4.5% 12.3%
Duane Reade 12/27/08 1,774,029 5.2 12.2 3.7 7,196,872 4.2 9.2
Rite Aid 2/28/09 26,289,268 8.1 DNA DNA 5,278,969 0.8 DNA
Walgreen 8/31/08 59,034,000 9.8 9.2 5.8 9,130,616 4.0 15.4
Composite 2008 136,087,197 9.0 10.9 5.0 7,434,834 — 11.3
Notes: Operating income is defined as sales less cost of goods sold less selling, general and administrative expenses and store opening/closing expenses.
Average store sales is computed by dividing sales by the average number of stores open at the beginning and end of the fiscal year.
Source: Company reports/Chain Store Age research DNA: Does not apply because of a negative result in either 2008 or 2007.
WHOLESALE CLUBS
Fiscal 2008 % % Change Operating Average % Change Operating
Year Sales Change Operating Income as % Sales per Comp- Income as % of
Company End (000) Sales Income of Sales Store Stores Total Assets
BJ’s Wholesale Club 1/31/09 $10,027,366 11.2% 13.2% 2.2% 56,175,720 9.4% 10.9%
Costco 8/31/08 70,977,484 12.5 22.4 2.8 141,954,968 8.0 9.5
Sam’s Club 1/31/09 46,854,000 5.6 –0.5 3.4 78,548,198 4.8 13.0
Composite 2008 127,858,850 9.8 11.0 3.0 100,281,451 — 10.8
Notes: Operating income is defined as sales less cost of goods sold less selling, general and administrative expenses and store opening/closing expenses.
Average store sales is computed by dividing sales by the average number of stores open at the beginning and end of the fiscal year.
Source: Company reports/Chain Store Age research
For more than 30 years we have been creating retail brand experiences for companies
around the world.
Interbrand Design Forum’s talent for game-changing innovation spurred us to create a business
model that integrates analytics-based strategy into what began as a design and architecture
group — the first and only company with such a comprehensive offering. This unique ability to
address retail’s growing complexity led many of the world’s top companies to our doorstep and
propelled Interbrand Design Forum to the forefront of the industry.
In 2008, we added Interbrand to our Design Forum name to reflect our place in the world’s largest
branding consultancy; we have been part of Interbrand since 2002. Today, we have 1,200 associates
in almost 40 offices around the globe and a practice that brings together a diverse team of insightful
right- and left-brain thinkers. This deep talent pool makes our business both rigorously analytic and
highly creative.
As a result, we have changed the dialogue, defined the meaning of brand management, and continue
to lead the debate around brand as a valuable business asset and what that means to retailers. By
making brand central to our clients’ strategic business goals, we help them create, manage and
grow the value of their brands.
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