What Caused Shopko to File for Bankruptcy? Two Parts to the Puzzle.

Last Wednesday Shopko, a general merchandise retailer with 333 stores, filed for chapter 11 bankruptcy.  On January 17th, SGB Media published an article on Shopko and the filing by Thomas J. Ryan with the title, “Shopko Becomes Latest Casualty Of Online Disruption.”

I took umbrage at the suggestion that online disruption was the primary cause of the filing.  It’s not that there wasn’t any online disruption.  Every retailer is dealing with some online disruption and how they manage it will determine if they survive.

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What Happens When the Apparel You Buy Fits Perfectly Every Time?

Technology that has value tends to get better and cheaper.  I can’t think of a reason that won’t be true for the Zozosuit.

“Japanese retailer Zozo, which operates Zozotown, the country’s largest online fashion marketplace, has developed a figure-hugging bodysuit featuring lots of uniquely patterned dots.”

“As you turn slowly round, your smartphone takes photos, building up a 360-degree image of your body shape. Then you can order clothes that really fit.”

There’s one problem with this new technology.  As you’ll hear when you watch this short explanatory video, it doesn’t quite work.

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It Probably Wasn’t the Plan; Abercrombie & Fitch’s November 3rd Quarter.

Back in 2012 A&F had 946 U.S. stores.  They ended the most recent quarter with 684 (plus 195 international stores).  In the immortal words of Gary Schoenfeld in his first earnings conference call as CEO of Pac Sun however many years ago it was, “Nobody needs 900 Pac Sun stores.”

Nobody needed 946 A&F stores either.  Given how the retail market is changing, the 28% reduction was probably a great thing, if not part of the plan.  It’s even more interesting to note that 400 of the U.S. stores are Hollister and only 284 are A&F branded.  Those of you who have been around a while may remember, when Hollister opened (the first store was in 2000), that as an industry we were pretty dismissive of the concept.  Don’t know if that’s because we didn’t think it would work, were afraid of it, or wished we’d thought of it first.

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Popups, Extra Week, Higher Costs; Tilly’s Quarter

Tilly’s sales for the quarter ended October 28th were down 3.9%, or $6 million, to $146.8 million from last year’s quarter.  However, the decline was due to “…the calendar shift impact of the 53rd week in fiscal 2017’s retail calendar, which caused a portion of the high sales volume back-to-school season to shift into the second quarter this year versus the third quarter last year, reducing last year’s comparable net sales base for the third quarter by approximately $14 million. This calendar shift impact was partially offset by higher comparable store sales and net sales from seven net new stores totaling approximately $8 million.”

Keep that $14 million in mind as you think about the quarter over quarter comparison.  That decline for the quarter was partly offset by seven new stores and higher comparable store sales (4.3%-  includes e-commerce) totaling $8 million.

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Attacking the Retail Challenge: Zumiez’s Quarterly Results

I’ve decided that my best recent article was “How Brick and Mortar Retail Has to Change,” written last June.  I was surprised it got so little feedback.  Probably because the list of what customers don’t need us to do anymore is a little intimidating, and we aren’t sure how to respond.

Even if, like Zumiez, your plans are responsive (as I see it) to the changing conditions, there’s still going to be a recession (not just in the U.S.), there’s too much product and manufacturing capacity, too many brands, too much retail space, too little product differentiation, and many customers have too little income.  And they have to spend more of that income on necessities.  I guess a cell phone is a necessity.  Certainly housing, food and health care are.

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What if Our Customers Just Don’t Have as Much Money to Spend?

We spend an awful lot of time trying to figure out how to sell our customers more stuff.  It’s been tougher lately and shows no signs of getting easier.  It’s the internet.  Or over supply and too much retail.  The customer wants experiences.  Poor distribution.  No product differentiation.  Too many brands.  A smarter and more cynical customer.

It’s all of that.  But maybe some of it wouldn’t matter as much if our customers just had more money.  For all of us the millennials, however we define that group, are an important group of customers.  But between lower wages, the gig economy, debt from college, health insurance costs, high rent and the requirement of having cell phones and sundry other necessary gadgets and services, perhaps they just can’t afford what we’d like to sell them.

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The New Company You Are Building as the Competitive Environment Changes (and Changes, and Changes)

Over years, I’ve written various articles about the evolution of our market and how we need to change to address it.  I’d decided it was time to pull all those ideas together in one, hopefully, thought provoking, insightful, action motivating piece.

Then a friend sent me Robin Lewis’s outstanding article on just this issue and I had no idea if I was relieved I didn’t have to write it or disappointed I didn’t get it done sooner.

Mr. Lewis’s article is called “First, The Bad News. Then 2019: Tough, Tougher or Toughest,” so don’t feel like you’ve escaped my occasionally urgent and cautionary tone on this issue.  He’s not precisely all sunshine and rainbows either.

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Looks Like Amer Sports is Going Private

Back in October, there was some speculation that somebody wanted to buy Amer Sports and Amer said, “Yup, it’s true.  We’re talking.”  I wrote a short article about it at the time.

On December 7th, they confirmed that there is, in fact, a cooperative tender offer coming beginning around December 20thHere’s the link to the press release on the subject.  At that time, a tender offer document with full information will be available.

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Emerald Expositions Cancels Interbike for 2019

Emerald issued a press release today announcing that the Interbike show scheduled for September 2019 was a no go.  Here’s the press release. I excluded the part at the end describing who Interbike and Emerald Expositions are.

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What’s Jeff Reading? Buying by Algorithm and Spoofing the Customer as a Marketing Tool

Back in July, I read an article called, “High-skilled white-collar work? Machines can do that, too.”  It talked about companies (Stitch Fix among them) using algorithms to design product and decide what and how much to buy when.  Here’s the link.

Two days ago my research department (whom I always hear from if I don’t give her credit) sent me an article on how the discount shoe retailer Payless, as marketing stunt, tricked people into paying up to $600 for pair of Payless shoes “…through an elaborate — and expensive — advertising prank to attract new customers and change the perception that the company sells cheap, unfashionable shoes.”  The article notes, and I want to make it clear, that Payless didn’t actually make anybody pay those prices and let them keep the shoes for free.  Here’s that link.

I try to take some time to think before writing.  That’s why you’ll often see a reaction from me well after an event happens.  My brain seems to require time to process outside of the urgent frenzy that can accompany an event.

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