What Will Retail Be Like in Five Years and How Will You Prosper?

That was the question asked at a meeting last week at the Agenda trade show.  The meeting was attended by various invited brands and retailers and by me.

This meeting has been going for maybe four shows now and has generally been thoughtful and productive.  That’s a welcome improvement from the larger group meetings that used to be held at ASR.  They tended to be a bit acrimonious and have limited value.  Except that I got a free breakfast.

I had to leave before the meeting ended for a dinner engagement and didn’t get a chance to put in my two cents worth.  But the topic keeps churning my brain.  Typically, that means I should write about it.

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The Impact of Demographics on the Active Outdoor Industry

I’ve just finished reading a book called The Methuselah Effect, by Patrick Cox.  As I’ve said, I often get intriguing business ideas from non-business books.  This is one of those times.  I really recommend this book.  The trouble is, it doesn’t seem to be on Amazon, which I’ve never seen before.

Anyway, the book is about advances in biotechnology and how they are going to impact health and longevity.  The first chapter title is, “Fewer Births, Longer Lives: Society’s Aging Changes Everything.”

His premise, which I found convincing, is that people are going to live longer and be more active.  But there are going to be fewer people.  He goes on to says in the first page, “From here on out, every generation will be smaller than the one before it.  After 200,000 years of population growth, mankind’s numbers are shrinking.”

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What Is the Value of Advertising?

I read with some amusement as well as concern this article about an apparently still ongoing and massive online advertising fraud.  I imagine you’re all aware of it.  Meanwhile, back in this article, I mentioned the increasing use of ad blockers, especially by millennials.  And within the last week or so, I questioned, as I pointed you to four article on changes in retail, how TV advertising was being received.  What I said was, “Perhaps it explains some of the advertising I see on TV these days where a brand tries so hard to find a compromise message that reaches the sensibilities of more than one group that you walk away not sure what product you just saw advertised or why you should care.”

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Some Waypoints in the Evolution of Retail

During the last couple of weeks, I’ve come across a number of articles that speak to the evolution of retail.  Here they are for your consideration in no particular order.

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The Buckle Has a Lousy Quarter- Kind of. Well, Not Exactly. Can the Outsized Returns Continue?

As I’ve recently written, Tilly’s and Zumiez were kind of caught by surprise by their very positive end of October quarterly results.  But because the surprise was of the positive kind, nobody seemed to care.  Though perhaps they should.

The Buckle, on the other hand, reported a 14.6% decline in revenues from $280 million in last year’s quarter to $239 million in this years.

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Zumiez Has a Good Quarter Too

Zumiez’s 10-Q for its quarter ended October 31 reported an increase in sales and profits.  I used the word “Too” in the article title because it sounds a bit like the Tilly’s results I reported a few days ago. Zumiez, like Tilly’s, would like to point to all the good things it’s doing as being responsible for the result.  And no doubt it’s fair to do that, but Zumiez, like Tilly’s was surprised by the strength it’s seeing and is cautious as to whether it will continue.

Net sales rose 8.4% from $204.3 to $221.4 million.  “The increase primarily reflected an increase in comparable sales of $8.2 million and the net addition of 35 stores (made up of 27 new stores in North America, 5 new stores in Europe, and 5 new stores in Australia partially offset by 1 store closure in North America and 1 store closure in Europe) subsequent to October 31, 2015. By region, North America sales increased $14.7 million or 7.8% and other international (which consists of Europe and Australia) sales increased $2.4 million or 14.6% for the three months ended October 29, 2016…”

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Tilly’s Has a Great Quarter, But I’m Not Sure They Completely Know Why

You can’t fault the numbers.  Sales grew 7.4% for the quarter ended October 29th compared to the same quarter last year.  That got them to $152.1 million in revenue for the quarter.  Comparable store sales rose 4.4%, accounting for $6 million of the revenue increase.  “Store comps were up low-single digits and e-commerce continued to grow at a double-digit rate.”  The rest of the increase ($4.4 million) came from five stores opened since the end of last year’s quarter.

Their gross profit margin, at 31.5%, didn’t change.  A 1.1% decline in product gross margin due to higher markdowns was offset by a reduction in expenses.

This is a good time to remind you how retailers calculate cost of goods sold to arrive at their gross profit margin.  Here’s how Tilly’s does it.

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GoPro Announces a Restructuring

As part of a press release entitled “Solid Holiday Demand in the U.S. for GoPro HERO5,” GoPro announced, further down the press release, that its board of directors had “…approved a restructuring of the Company’s business.  The restructuring includes a global reduction-in-force, the closure of the Company’s entertainment division and the consolidation of certain leased office facilities.”

“The  Company  estimates  that  it  will  incur  total  aggregate  charges  of  approximately  $24  million  to  $33  million  for  the  restructuring,  including approximately $13 million to $18 million of cash expenditures as a result of the reduction in force, substantially all of which are severance and related costs, and approximately $11 million to $15 million of non-cash expenditures, consisting primarily of stock-based compensation expense and accelerated depreciation associated with office consolidations. The Company expects to recognize most of the restructuring charges in the fourth quarter of 2016.”

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Internet Related Issues for Retailers and Brands to Think About

I wouldn’t quite characterize this as an article as much as random musing about some internet experiences I’ve had.  I can’t wait to see what I write.

My microwave broke.  Not so much broke.  The door wouldn’t latch so I couldn’t use it unless I stood there and held the door closed.  Not particularly practical.  I thought to myself, “Damn, it’s either a $150 service call or a new microwave.”

But for some reason, I went to YouTube and searched under “microwave door won’t close.”  And the very first video that popped up was exactly that for my model.  Literally 15 minutes later, I’d taken out a screw, popped part of the door away from the gasket, reinserted the stupid spring that had come lose (probably from the kid slamming the door too hard- unless it was his father who was doing it) and it was fixed.

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Why Did The Great Recession Happen?

Why Did The Great Recession Happen?

If you’ve ever looked at the suggested reading list on my web site, you know that I read some stuff that’s not related to business and certainly not to our industry.  Not directly that is.  But I think it helps me understand the environment we operate in and perhaps get a perspective I wouldn’t otherwise get.

William R. White is an economist who was recently awarded the apparently very prestigious Adam Smith prize.  He presented a lecture when he accepted the prize called, “Ultra Easy Money: Digging the Hole Deeper?”` Read more