Kenmore Live Studio—Can Sears Resurrect Its Brand?

We just visited a fascinating experiment from Sears called Kenmore Live Studio. Dubbed a “social media factory”, the basic idea is that this will become a physical space to showcase the Kenmore brand. While we’ve been lamenting a lack of creativity, this is certainly a concept that is pioneering a new direction.




Kenmore Live Studio is located on the corner of North and Wells in Chicago. It is a curious place to put the concept, a trade area that is more restaurant and/or art gallery than retail. It will not have the walk-by traffic that one would associate with “pop-up” locations but may be fine for the purposes of a destination draw. The space is designed to be a gallery of sorts for the Kenmore brand, with the focal area being a stage/demonstration area for cooking classes and live events. This content is then edited live and disseminated via Kenmore’s Facebook page….www.facebook.com/Kenmore. The format just opened with plans to be around for six months. Generally closed during the day, the main interactions will be on evenings and weekends. They have already hosted chefs, a cookie cook-off and a demonstration for organization tips.

This is an intriguing idea—part social media, part pop-up—that explores new ways that brands will begin to interact with customers in the future. Interestingly, nothing is for sale, so the real measure will be in visibility for the Kenmore brand (or, at minimum, new Facebook friends. There are now just 439 of us, so there is tremendous room for growth for a brand that is in tens of millions of American homes).

We did not see the concept in full action though we did drive-by on a weekend night and the huge flat screen TV does draw interest from the streets. You can also watch the space live on Facebook and measure crowd appeal. The success will obviously lie in content programming—a quick look today reveals no “scheduled” events, only past ones, and this kind of medium needs constant attention.

To the bigger picture, we wonder about the mother brand, Sears, and its future. While it seems to clearly be losing the brick and mortar war in the Sears format (year upon year upon year of comp store declines is our real indicator, not how much profitability can be wrung from the box…), they do seem to be doing a lot of things right in the e-commerce space. The web site and sales continue to grow; they remain leaders in creating site to store solutions with ideas like My Gofer and do seem to be very aggressive with social media, mobile apps and the like. Much of this may be window dressing if the core stores can’t turn around but slowly, perhaps, the image of Sears is beginning to change.

Kenmore Live Studio is another compelling glimpse into a multi-channel future.

Martin & Osa--RIP

This week, American Eagle Outfitters officially pulled the plug on their ambitious Martin & Osa concept. This will mean the closing of 28 locations and the end to yet another experiment by a specialty retailer to target an older demographic. Abercrombie & Fitch had already pulled the plug on their upscale and older Ruehl experiment.

With our recent blog on the closing of Fashionology, we seem to be spending more time writing obits than we do celebrating the opening of new ideas. This is surely a sign of the times: the optimism inherent in these brand extensions simply doesn’t exist today. Both Reuhl and Martin & Osa suffered from a combination of bad timing as well as a struggle in truly finding their identity.

Straight out, we were big fans of Martin & Osa (even typing this blog has me in M&O fashion). We loved the lifestyle approach, particularly evident in the early stores where music, books and eclectic merchandise also accompanied the fashion. There was the wonderful back stories of the intrepid adventurers (yes, they were real folks) that anchored the men’s and women’s collections. The store design was visually stunning and cool and had some awesome dressing rooms!

Ah, but what about the product? It seemed maddeningly hit or miss. But, of course, this was highly dependent on which customer it was being designed for. The price points and styles jumped all over the map, which led to some great (for the shopper) markdowns but undoubtedly hurt the bottom line. In fact, they announced over $40 million in losses on the 28 stores which led to the inevitable plug pulling. We loved some of their fashion but it was never entirely clear as to what precisely Martin & Osa’s role would be (it seemed to want to play somewhere in the Banana Republic/J. Crew genre but never had those concept’s clarity). The clothing was casual but didn’t really transition to the workplace. It was conservatively styled but lacked some flair to make it the right choice for a night out. And, while we knew of several men who owned pieces, the women’s side (which, of course, is always more important) never seemed to connect on quite the same level.

But, we found ourselves rooting hard for the concept to find its legs. It has great imagination—it failed to back that up with product that matched the ambition. We look forward to a day when we can glowingly write about new ideas that are trying to break through the clutter. In the meantime, we suspect there are a few more of these unfortunate obits still on the way.

Location, Location, Brand


Walgreens’ recent acquisition of Duane Reade and Ahold USA’s purchase of the venerable Ukrop’s chain has put us in a reflective mood. First, these and some other recent acquisitions (Tops acquiring P&C Food) or attempted acquisitions (Albertsons announced offer for Bashas; Simon’s offer for General Growth) suggest that we might be beginning to see some real M&A activity after a fairly prolonged drought brought upon the freezing of capital markets. However, most of the acquisitions would be classified as “strategic” buys, retailers buying retailers, which suggest that the private equity guys still remain largely on the sidelines.


The notion of a “strategic” buy is really at the heart of what we’re musing about. On the surface, both acquisitions are simple enough to understand. They are real estate motivated—Walgreens getting access to 250 or so coveted locations in the densest market in the US and Ahold, through its Martin’s division, extending its store base in Virginia. However, acquisitions are rarely “simple”, as culture, format uniqueness and long ingrained shopping habits play a large role. In both of these cases, giant chains are taking over relatively small companies so the assumption is that the smaller companies will be quickly absorbed into the bigger firms’ brands and cultural folds.


As we dig further into the details, both begin to get interesting. Shortly after acquiring Ukrop’s, an announcement was made that the Martin’s name would become the main banner. This makes a world of sense from a synergy standpoint but also erases one of the most venerable names in food retailing off the map, not to mention an institution in their hometown of Richmond. Right or wrong, this is not a slam dunk decision but easily understood. Shortly thereafter, the first and highly unlikely culture test came into play—hereafter known as the great Girl Scout cookie incident. Seems that Ukrop’s has a long-standing tradition of allowing local charitable institutions to sell outside their stores--Ahold does not and banned the practice. The publicity that ensued (mostly negative for Ahold) is almost comical in scale but highly illustrative of the dangers of messing with culture. The much bigger deal ahead is that Ukrop’s, due to religious beliefs, never sold beer and wine and closed their store on Sundays. Again, Ahold is making a simple decision to reverse those sales killing decisions this Spring and it should theoretically yield almost an instant 20% sales gain. But, as the Girl Scout flop shows, messing with a brand is serious business.


The dust has yet to settle on Walgreens/Duane Reade. Again, on the surface, the locations Walgreens will secure are almost priceless and will allow for penetration in the New York City market that would be impossible to duplicate. A few short years ago, the Duane Reade brand (and stores) was in critical condition. Famously cluttered and with indifferent service, it was a brand New Yorkers loved to hate. But, the current management team has done a remarkable job of making over the chain. A new logo, stunning new store design, new private brand programs, an emphasis on higher end beauty and a re-dedication to customer service woke up Duane Reade (and was probably a significant contributor to the $1 billion + purchase price). So, now what? It would be an easy decision to turn these stores into Walgreens and gain instant synergy. Or, does Walgreens choose to let Duane Reade remain independent and perhaps be the template for urban stores? Whatever the decision, Caveat Emptor (let the buyer beware)—there is more to a Brand than meets the eye.

Fashionology—An Unfortunate Retail Failure

Fashionology’s fate was probably sealed a year or so ago when ICSC named it one of the country’s Hot Retailers for 2009. This tween based concept that allowed customers to custom-create their own t-shirts and other apparel certainly had promise and a number of cool elements. But, as we have seen so many times before, there is a huge difference between a promising concept and a successful one. We had just visited (and shopped) at Fashionology and the ideas and flaws were readily apparent.




What was great about Fashionology? The ability for girls to custom design their own clothing brings out the Project Runway in all of us and the high tech and high touch machines made it easy to bring the customization to life. At the end, the customer could have their picture digitally taken with their creation and e-mailed to their friends or posted on the Fashionology site. The store could handle birthday parties and it would be a blast. And yes, we did buy something for our daughter, who said she loved the design.





It’s easy to see how it grabbed initial publicity. However, getting named a “store of the year” or “hot concept” often seems to lead to failure rather than success.

Our visit revealed some gigantic problems. As clichéd as it may seem, the retail adage of ” location, location, location” always seems to come into play. The first (and it turns out) only retail location was in Beverly Hills, on Canon Drive, a good block away from the real (and really expensive) retail activity. But, even had it gotten closer to the heart of Beverly Hills retail, it still would have been the wrong place for this concept, which would have been much more at home and much more accessible to its customers in a mall.

Additionally, it was expensive. By the time we were done “blinging” our shirt and buying a few buttons, we were staring at a $40 + price tag, which is a lot for a girl’s long sleeved shirt. Fun to do once but not necessarily a place to build a wardrobe. Patterns, colors and styles were also fairly limited, which further reduced the overall appeal.

Fashionology announced a January 21 closure. As with many concepts with promise, the fixes may have made a huge difference, beginning with a better location. But, funds obviously dried up and we may never know if there was something lasting here. It reminds us again just how difficult it is to start up a retail concept. Fashionology joins the unfortunate ranks of new concept failures.

Sol Price—A Retail Revolutionary

We were saddened to hear about the passing of Sol Price, a retail legend who revolutionized retailing over the past several decades. We also have some very personal links to Sol, and can trace McMillanDoolittle origins almost directly to that era of profound retail change.

For those not aware, Sol Price founded Price Club, which was the original membership warehouse concept pre-dating any of the efforts we see today. He almost single-handedly created the notion of this business, which is now well over a $100 billion business in the US and taking root internationally as well.

It all started with Sol Price in a single club in San Diego in 1976. Sol had the revolutionary idea of re-inventing the productivity chain in retail: Carry a few of the absolutely critical sku’s, sell in incredible tonnage, with great velocity, at extremely low margins and charge membership fees paid for by consumers for the privilege of shopping. And, being the brilliant merchant that he was, Sol also figured out that creating a treasure hunt environment that mixed unexpected surprises with the staples would keep customers loyal and coming back again and again. In the process, he created retail stores that drove volumes in excess of $100 million, unheard of that time and still rare today.

While we are all now familiar with how the model works, so many pieces were so radical at the time that his ideas were dismissed by many in retail. Of course, there were a few people paying close attention. Jim Sinegal of Costco worked for Sol Price and later launched his own concept and eventually acquired Price Club. Our founder, Sid Doolittle, was an early follower as well, and partnered to open The Warehouse Club in the Chicago market. Other early models included BJ’s, The Wholesale Club, and Pace. And, there was a guy named Sam Walton who used to visit Sid Doolittle at his first Chicago location on the weekends…..600 stores and nearly $50 billion in revenues later, Sam’s Club remains a staple of US shopping.

For many of us who have worked at McMillanDoolittle for a long time, we had the privilege of learning the lessons of high productivity retail from Sid Doolittle first hand. For such a simple idea, execution becomes incredibly complex and razor thin margins necessitate an extreme focus on all of the levers of retail profitability. But, while the clubs have been around now for 30+ years, the lessons of productivity are slow to take hold. Even today, with all of the analytical tools at a retailer’s disposal, the club model still produces 50 to 100 times the productivity per sku than the retail models it competes against—drug stores, supermarkets, discounters and supercenters.

In our book, Greentailing and Other Revolutions in Retailing, we began our discussion reviewing historic revolutions in retail, ranging from the birth of the supercenter to the advent of the Internet. And, there was certainly a prominent place in that discussion of the contributions of Sol Price and clubs. In an era of so much sameness, the real innovators tend to stick out. Sol Price was one of the true icons of modern retailing.

Big Book R.I.P.

With JC Penney’s recent announcement that they will no longer publish a big book (their large general merchandise catalog), it effectively ends the lifecycle of a business that ushered in modern day retailing in the United States as we know it.

Back in the late 19th Century, Montgomery Ward began the mail order business in Chicago, IL (a major rail and water hub perfectly positioned to serve the established East Coast markets and the emerging West). Along with Sears, Roebuck and Spiegel, mail order boomed through the first half of the 20th Century, bringing goods to customers in remote areas and effectively ushering in modern consumerism in the United States.

Post WWII, as Americans began to cluster in closer to the cities (the development of the suburb) and with brick and mortar retailing greatly expanding (the simultaneous development of the modern day shopping mall), mail order began its gradual, inexorable path to extinction. This was particularly true for the big books of Sears and Montgomery Ward that also relied on their stores or catalog stores for product pick up and return (and we think multi-channel retailing is a new invention…). But, for millions of Americans, the arrival of the big catalog provided an incredible window into the all of the products that could be available.

By the 80’s, the general merchandise catalogers reached further obsolescence, as specialty catalogs and specialty retailers proved to be more nimble and cost effective than the cumbersome books. One by one, the big books fell, and often their companies with it—Montgomery Ward and Spiegel both disappeared and Sears shut down catalog operations.

Ironically, JC Penney who was late to the catalog game (they entered through acquisition in the 60’s) also survived the longest. Catalog remained a multi-billion business for them in the late 1990’s. Most importantly, they hung on long enough to effectively bridge the gap into the modern day era of e-commerce. As the Internet began to boom in the late 90’s, JC Penney had the infrastructure and name to become an instantly formidable player in e-commerce as other companies struggled to quickly ramp up capability.

Unquestionable, as catalog retailing changed the retail landscape in the early 20th Century, e-commerce is having the same effect on the 21st century.
Even though this obit could have been written fifteen years ago, we’re going to miss those big books and that link to a form of retailing that brings back a flood of nostalgia.

In our most recent book, Greentailing and Other Revolutions in Retailing, we discuss this very theme. As mail order fades, e-commerce takes it place. Has the modern day department store been rendered irrelevant by specialty and discount stores? Will Amazon make book superstores obsolete? And most importantly, what’s around the corner that will one day threaten Amazon?

Taking Private Label Public

One of the few bright spots in retail has been the explosive growth of private label during this current recession. While private label has also grown during non-recessionary periods, the double digit increases of late has brought overall share to historic highs in the U.S. Individual chains, like Kroger, report that private label share is now in the high 20’s as a percent to sales and nearly 35% of units.

Of course, private label growth has been coming at the expense of national brands, with private label growing faster than brands in most categories. For retailers, the trade-off between lower average selling prices and higher margin is one they seem willing to make. In fact, many have begun to take the battle for private labels very public, beginning to compare both quality and price to the brands:

•Major re-launches for private brands that have occurred this year include the massive packaging re-design and reformulation of Wal-Mart’s Great Value brand, which is the largest single private label brand in the U.S. Target also chose to replace its iconic “bulls eye” packaging in personal care and households products with the Up & Up brand, which is finding its way onto shelves now.

•Stepped up media efforts include companies like HEB, Loblaws and Safeway running dedicated spots for their private brand programs. In the case of Safeway, brands such as Eating Right and O Organics are being sold outside to other retailers (shades of Loblaw’s Presidents Choice from years ago).


We have also seen more guerilla-marketing driven efforts appear of late, sometimes in seemingly unlikely places:


The first evidence comes in the form of an old supermarket trick—the shopping cart comparison. In the old days, of course, the cart would be used to compare Store A against Store B and show how much cheaper they are. Now, we see a diverse group of retailers performing the same comparison, using private label and national brands. The photo to the right is Costco, which shows a whopping $116 savings on a $442 basket, nearly 30%. The fact that this is placed prominently at the front, after walking through a display of exclusively private label products makes the impact that much more powerful.



This picture is Safeway, which is offering a $44 savings, or over 35%, in their basket against national brands. They have also been aggressively marketing the quality of their private label with in-store POP materials.







What happens when you don’t have national brands in your store? Trader Joe’s goes back to the tried and true of comparing against another retailer.

This time, Trader Joe’s compares their basket of private label against Dominick’s (Safeway), as you can see from the image on the left.

In fairness to Safeway, they were only 40% cheaper (great merchants, lousy mathematicians…)








We did something similar last month. As part of a larger pricing study, we looked how private label prices compared across retailers. Now, we acknowledge that this isn’t the way a consumer shops (they compare private label to a national brand at the shelf) but we did think it would be interesting to see who has the lowest prices on private label, period. In a basket with 10 private label items (they can’t be called identical because they aren’t brands and are not the same), Aldi was 25% lower than Wal-Mart and nearly 80% lower than the two leader Chicago area grocers—Jewel and Dominick’s.

Finally, Consumer Reports recently weighed in, asserting that a number of private label products did as well or better than the brands in their tests.

As private label becomes more mainstream, it puts pressure on the retailers to deliver products that deliver on the promise and national brand manufacturers to fight back with real innovation while ensuring that the value remains.

One thing is certain—the battle of private label versus national brand has been elevated to a very public status.