"Made for All" - our visit to the new Fifth Avenue NYC Uniqlo

Japan’s basic apparel category killer store Uniqlo opened its 89,000 square foot (bigger than a football field!) Fifth Avenue/53^rd St. location (second of three planned New York City locations) on October 14, 2011. We had the opportunity visit this store during a short 20-hour jaunt to the Big Apple.

By nature of our flight’s arrival time into the city in the late evening, we had the good fortune of experiencing the store during an off period – about half hour before closing. The store was certainly less chaotic at this time during the day – we attempted to go the next evening as well but quickly exited the can-of-sardines environment.

From across the street, the store exudes an Apple Store-esque glass cubic glamour. Fully-functioning elevators are closed off to the public and instead display a mannequin couple, riding up and down in the front windows to the delight of passersby.

It’s easy to forget that you are in a clothing store– with the clean, stark open format, the store has the same look and as Narita airport, complete with three long escalators in the center of the store and a cool, soothing female voice over the loudspeaker welcoming you to Uniqlo and announcing what products are on each floor.

Uniqlo somehow attracted the only happy, helpful, and efficient employees on the island of Manhattan. Two Uniqlo jacket-clad greeters at the entrance welcome customers and offer a large basket – genuinely friendly and not at all pushy. (Note: the staff wins extra kudos for calmly and genuinely willing to spend quite a bit of time helping us dig through a huge pile of Uniqlo’s $9.90 opening special jeans to get our size – seemingly oblivious to the surrounding chaos!)

The store does a beautiful job of “layers” of communication on the merino cotton apparel and the brand’s new “Heat-Tech” line:

Large block letters catch the customer's eye by  indicating what material line the product is from - "100% Extra Fine Merino"

Second board gives information about the premium quality of the merino material.

Smaller sign as you look closer at the product -- indicates the style, and a more detailed description of the style.

Eye-catching hallway draws customer in

Boards on top of product racks educate and encourage shoppers to buy other products from the same line.

The store makes good use of brightly lit floor-to-ceiling LED screens to feature their products as well as Uniqlo brand ambassadors. The screens were not interactive, but this may have been deliberate, as shoppers seemed more intent on stuffing their bags with as much Uniqlo product as possible rather than admiring the surrounding décor.

Several walls are completely paneled with LED screens, giving shoppers styling ideas

The store is somewhat confusing in terms of layout, but there are maps on the walls and the aforementioned loudspeaker message. On the main floor, the layout is maze-like and designed for the quick-paced wanderer. There are specific areas on the mezzanine floor for people to sit, conveniently out of the way of shoppers – genius. 

Seating area for tired shoppers and shoppers' mates, conveniently out of the way.

Uniqlo’s impressive displays are essentially the apparel version of Whole Food’s produce section. The merchandise is neatly stacked, hung, and folded in wall shelving, displaying Uniqlo’s extensive range of color options in each style.

Category killing in basics - like basic t-shirts.

More category killing in basics.

Take one product/material and do it well...in every color!

Checkout is stress-free single-line Whole Foods –style. Interesting to note: when checking out, staff members have a scripted response: “Your total is $X for X# of items.” – perhaps to emphasize how much bang you’re getting for your buck?

Overall, Uniqlo gives off a very clear message that certainly seemed to resonate with consumers – there was no rhyme or reason to the demographic in the store, and the melting pot of people epitomized Uniqlo’s tagline (which is currently plastered all over New York City public transit and billboards) “Made for All”.

It was certainly made for us, that’s for sure. We actually had to purchase another bag to haul back our Uniqlo treasures…

Report from WRC--A Global Perspective on Global Innovation

We had the pleasure of attending the World Retail Congress in Berlin, which was held from September 25-28th of 2011. The World Retail Congress is a gathering of international retail executives. While there is a decidedly European feel to the conference (and attendees), North America and Asia was reasonably represented.
Ebeltoft’s (and our) official role at WRC was a coordinator and judge in this year’s Retail Innovation awards as the US member of Ebeltoft Group. This year, a record number of nominations were submitted and categories were split into two categories—business innovation (more about process) and format innovation (more about format).
The finalists provide a telling view on where Innovation is headed. In the format innovation category, they were:

• American Eagle –77 Kids. Their new concept store incorporates innovative digital in-store experiences with a dynamic in-store design
• Carrefour Planet. The most significant reinvention project in retailing. An attempt to reinvent the generalist hypermarket concept into a multi-specialist store
• Disney Store—New York. The largest Disney Store , representing their large scale reinvention, incorporating immersive interactive experiences
• Shoes of Prey—Australia. The only pure play on-line retailer, where customers can customize and design their own shoes, changing the color, toe, heel type, back etc.
• Eataly—New York. The fantastic New York outpost of the Italian food concept, blending together restaurant and food retail in a dynamic experience.
• The Craftsman Experience. Built as both a store and studio, this concept re-defines the relationship between a bricks and mortar store, the Internet and social media.

The winner in this category, Eataly, proves that retail excitement can still drive significant traffic to a brick and mortar store. Eataly reports first year revenue of an eye-popping $80 million.

Under business innovation, the range of submissions were vast, from weather forecasting tools to the latest take on loyalty marketing. The finalists were:
• Donna Ida—Denim Clinic. One-to one appointments to find the perfect pair of jeans.
• Karen Millen and Aurora Fashions—Deliver from 90 minutes. The world’s fastest fashion on-line delivery service
• Payvment—Facebook Storefront. The number one Facebook ecommerce payment platform for more than 800 million Facebook users.
• Titan Industries Goldplus—A soft benefits loyalty program for a jewelry chain in India, which rewards customers in the form of life experiences (a Cricket Match, trip to a Temple, etc
• Adidas—adiVERSE Virtual Footwear Wall. An in-store virtual footwear wall for Adidas utilizing state of the art Intel processors and touch screen technology.
• Tommy Hilfiger Europe—The Hilfiger Club +ID24. Interactive touch screens at POS to drive higher loyalty.

The winner here was Adidas, who also had their wall on display at the WRC. They plan on introducing this into a physical store environment within their London Flagship store.

What do these concepts have in common?:

• The seamless (or attempt to make seamless) integration of new technologies
• Blending together on-line and off-line experiences
• Creating more personalized and customer experiences, whether through the customization of products or the customization of experience.

In addition to the cases highlighted at WRC, Ebeltoft Group produces an independent project focusing on additional cases from around the world that showcases true global innovation. Contact me at nstern@mdretail.com to reserve a copy.

Loyal Until The First Screw-Up

Like many, we received an e-mail from Netflix CEO Reed Hastings this morning concerning the controversy surrounding their sudden price increase (upwards of 60% in many cases, including ours) a few months back. In addition to suddenly increasing prices, there seemed to be zero recognition of customer loyalty. When we cancelled the “by mail” portion of our subscription, the response was an automated statement requesting that the outstanding DVD’s be returned immediately or we would be charged the full price, etc… Nice knowing you, Netflix.
Apparently, we weren’t alone. The latest results from Netflix reveal a rash of subscriber cancellations, with subscriber base declining by nearly a million. This is even more startling because the company was on a significant growth trajectory prior to this move. The streaming side has also faced its own issues of late, losing its contract with Starz, a popular source of streaming content. The stock, predictably, has plummeted from its earlier dizzying highs. And yet, two months went by without a direct response to the million(!) customers who apparently were unhappy.
So what did Reed have to say to customers today? Along with a brief apology, a more detailed explanation of the “business” problem emerges. Internally at Netflix, streaming and by mail businesses need to be nurtured and grown separately. As a result, they are officially separating the two models, even renaming the original business to Quikster. Customers who subscribe to both will now get two invoices and visit two separate websites. But, the good news—no more price increases for the added inconvenience!
While Reed Hastings has been one of the more dynamic executives of the Internet age, we suspect that this second explanation isn’t going to play much better than the first. The consumer moved from a bundled (and intuitive) solution to a separated one. We would suspect that more customers will opt out of one (or both) services and that it will be much easier to view their offers independently against other options. Two months in and can’t saw we’re missing the by-mail service and the streaming option often disappoints with limited or dated content.
While the intent of aggressively positioning the business for a streaming future so his business doesn’t become the next AOL or Borders is an admirable one, the execution of this plan has consistently lacked thoughtfulness and most importantly, a focus on the customer that Netflix (or Quickster) is supposedly serving.
So, apology not accepted. And for businesses that pride themselves on delivering customer service, the caveat in the headline applies: customers are only loyal until you give them a reason not to be.

Diapers Direct and the Perils of Groupon

“We sincerely apologize about the delay on your product delivery.” These are not the words that you want to see when you open your email, particularly with something as essential as diapers. At the beginning of June, we purchased a $25 Groupon for $50 worth of product from diapersdirect.com. We promptly placed our order (as many others did as well), and received our diapers in mid-June. Apparently, we were one of the lucky ones, as we discovered that this was the fourth email that Groupon customers had received regarding unfulfilled orders. So, we did a little digging and this is what we found:
• A quick Google search indicates that Diapers Direct offered a Groupon in Amarillo on May 11 which was purchased by 1,396 Groupon-ers. Over the course of the next 3 ½ weeks, this deal was featured in at least five other cities and purchased by over 900 additional customers. As we read the email mentioned above further, Diapers Direct goes on to state, “An estimated 98% of Groupon customers at our website have used their coupon within one day of purchasing it. The steady stream of customers over a six month period that we had planned for became a tidal wave of orders all made in the past thirty days.” Recent data from Groupon is consistent, with only 10% redeeming their coupon within one month, but if nearly 1,400 orders were placed on day one, this leaves us scratching our heads as to why Diapers Direct didn’t pull the deal after the first tidal wave of orders.
• Diapers Direct is a small business (with only 3 employees, according to their email) that presumably used Groupon in order to get a couple hundred new customers. “We have had commercial customers that purchased as many as 110 Groupon coupons.” Unfortunately, they didn’t set a limit on how many people could purchase their coupon and they instantly became overwhelmed.
• In a recent study on daily deal sites conducted by Rice University, nearly 80% of coupon users are first-timers, and only 20% of them become repeat customers. This conversion rate does not bode well for Diapers Direct (particularly since so many customers still have open orders). “We are by nature a recurring order company. A company designed to make monthly deliveries to a regular repeat customer base.” We’re betting the commercial customers mentioned above were not planning to become repeat customers. What’s more, any pre-existing customers are likely having a difficult time placing non-Groupon orders, damaging their existing customer base.
So what are the lessons learned?
• Know how Groupon works. Understand everything from what percentage Groupon will take of your profit, how many coupons the deal is limited to and how many coupons are available to purchase for each customer.
• Ensure your business can cover the discount you will offer. Diapers Direct planned to “lose a little money on every transaction and expected to do so as this was our way of introducing ourselves to all of you.” They likely did not plan for as many transactions as they got.
• Plan for best and worst case scenarios. Can you accommodate 1,000 new customers? Have you ordered additional stock for the initial wave of orders and the final month of your deal as customers try to use their soon-to-expire Groupons? Do you have enough staff to accommodate the influx of orders? Even if Diapers Direct had all product in stock, three employees could not efficiently and effectively fill all orders in a timely manner.
Groupon is bigger and more powerful than most of us understand. It’s either a quick way to double your sales or to go out of business.
There’s no question that Groupon, Living Social and the myriad of competitors are nothing short of a global phenomenon in retailing, service and foodservice businesses over the past two years or so. It is equally clear that there is much that’s unknown about these offers, particularly as it relates to both short and long-term success. We know the old saying Caveat Emptor (buyer beware!). In this instance, Caveat Venditor (seller beware!).

This is a guest blog from Felicia Greenbaum, McMillanDoolittle Business Manager

Bloomingdales.com--The devil is (apparently lost) in the details

It is wonderful to see how well Macy's Inc. (parent of Bloomingdales) has been doing of late. They are in their second year of comp store increases and they do seem to have the company heading in the right direction. In their last press release, they also made note that their e-commerce division is performing even better--up a spectacular 40% year to year.
As a retail consultant, we tend to live in the kind of numbers above. As a customer, things tend to be a little different. We recently bought some California King sheets during a great sale at Bloomingdales...good item, great price, etc...
When the sheets arrived (in a horribly oversized box with no padding, by the way), they were not the "latte" clor we wanted but a very lovely purple. This is despite the fact that the bar code tag said latte...oops.
So, now what?
1. Called our local store who nicely explained that they don't sell Cal Kings in Chicago but we could try and call a California store...
2. Returned the item (at our expense) and explained they got the color wrong
3. A few weeks later, the replacement comes...and yes, still purple! Two observations--they clearly mis-tagged the product and; there is no human checkpoint to distinguish between latte and purple..
4. Return the sheets to a local store and (again) explain the problem. Their advice? Wait about 30 days before ordering again and HOPEFULLY, they will have figured out the whole latte/purple mix up by then
5. Receive a Bloomie's gift card (no credit refund) for an amount that is less the cost of the original shipping, return shipping, etc
6. Bottom line--no sheets, an enormous hassle and out money
What's wrong with this picture? It's almost impossible to figure out where to begin--failures in process, quality control, customer service, and so on.
It's nice to hear that on-line sales are up 40% but how will they be able to position themselves in the long run against a growing number of competitors who have figured this stuff out?

Apple: A Decade of Retail Revolution

On May 19, 2001, the first Apple stores opened (more or less simultaneously) in Tysons Corner, Virginia and the Glendale Galleria. While the stores were eagerly awaited, they were also greeted with some understandable skepticism. Gateway had notably flamed out in retail, having to close all of their stores and Sony had been flip-flopping with a retail strategy during this same time period as well.

One of our favorite quotes on Apple’s retail strategy comes from a story headlined: Sorry Steve, Here’s Why Retail Stores Won’t Work. The story explains in some detail why getting into retail is a bad idea and ends with a quote from David A. Goldstein, who states, "I give them two years before they're turning out the lights on a very painful and expensive mistake".

Unfortunately, for us, David had some company. In our Retail Watch newsletter from July of 2001, we extol on the virtues of how cool the stores, saying “it helps that Apple’s stuff is cool itself—their product design is second to none and showcased within this amazing new environment”. Unfortunately, we also go on to say, “It will be very hard to ever make any money”. Oops.

So, how are the Apple stores doing? Well, we were only a few billion dollars off when assessing future profitability! In fact, the stores are obscenely profitable—300 stores Internationally, and over $2 billion in profits on $9 billion in sales. More to the point, they are one of the few branded retail stores (Nike and Coach join the ranks) that succeed in both elevating the image of the overall brand while delivering high levels of profitability.


Other numbers are equally astounding:

• Sales per square foot, a key measure in a retailer’s productivity, are estimated at around $5,000 per square foot! No one else in retail even comes close.

• Traffic counts are equally amazing, particularly in such a condensed space. Apple is averaging 15,000 customers per week in their stores, which is extraordinary given the compact store size.


Now, since we owned up to a “slightly” off prediction on Apple’s retail prospects, we also want to point out that it is a radically different company today than in 2001 (here comes the mea culpa):

• In 2001, Apple was a relatively small computer seller with a 3% market share. We still maintain that those margins on computers and the relative difficulty of the computer sales cycle does make selling "computers" profitably a daunting experience. Apple was “only” a $5 billion company back in 2001.

• Apple is now a huge consumer products retailer. Selling iPods, iTouches, iPhones and the like, in droves, is a very efficient retail proposition, accompanied by higher (and controlled) margins. The relative levels of profitability (and overall revenues) sky-rocketed once this shift took place. For history’s sake, the first iPod debuted in October of 2001 while the country was pre-occupied with post 9/11 matters. In 2011, Apple could well hit $100 billion in total revenues. Wow!

So, it becomes a classic "chicken and egg" dilemma. Could have Apple ever been a successful retailer without the dramatic introduction of game changing products like the iPOd? Conversely, would those products ever had a chance to shine without dedicated retail distribution?

The flipside of Apple’s retail success is that it has encouraged a number of other companies to follow suit. Few, if any (though we’re careful NOW not to make sweeping predictions) will ever come close to reaching Apple’s success: A rare combination of brand, product and an extraordinary retail experience came together to forge this remarkable game-changing retail story. Most companies will find themselves lacking in one or all of these areas.

There are rumors that version 2.0 of Apple retail is on the way. We can't wait.

Who Moved My Chipotle?

In my hometown of LaGrange, Illinois, something curious has happened. The (and one can only presume based on dozens of visits) fabulously successful Chipotle branch in the heart of our downtown moved…approximately three blocks away. Now while this would not seem to be of particular consequence, there are some extenuating circumstances behind the move:

• It moved to the “other” side of the tracks. While the original location was directly across from the commuter train stop, the new location is a block or so North, at the intersection of the two busiest roads in town.

• It moved, very ironically, into a recently closed Baja Fresh location. Yes, it was pre-wired for burritos but the next logical question follows…why exactly did this Baja close?

• It moved to a location with parking, though shared with Walgreens, Caribou and an AT&T store. The parking is certainly a plus over the sometimes “impossible to find a space” downtown location.

So, you ask—what’s the problem? They stayed in the hood and added parking. Let’s examine the other side of the ledger:
• The new location feels (and almost certainly is) smaller. Seating only is for around 50 (at best). Worse, there is no separation between the seats and the line so there is a decidedly uncomfortable feel while queuing or eating. While we have been in tighter Chipotle spaces, the old space (long, with high, exposed ceilings and real character) had a significantly more pleasant feel and atmosphere.

• The old Chipotle was incredibly popular with the teenage crowd. Along with Starbucks a block or so away, it was the de facto hangout in town. Who wants teens hanging around? As long as those teens have money (which the La Grangian version most certainly do), why not. This location is not nearly as central to the walking crowd which is a significant part of downtown traffic, particularly during the (admittedly rare) nice days of Chicago.

In all, a curious move. Could the addition of parking trump all of the other negatives? Was the landlord simply impossible to deal with? We’ll find out. We suspect that business will be down but maybe Chipotle’s magic trumps even a bad real estate play. While we are huge fans of Chipotle, we are once again reminded that all retail is local--while they are winning big time on a national scale, this might be a local loss.