Reprint from SGB February 1, 2000
Let the Super Show begin! It’s a new year, a new millennium. So much for Holiday ’99. We’re at a crossroads – it’s a “New Beginning”. So what’s it all mean anyway?
Where are we as Sporting Goods Retailers?
We’ve just emerged from another year of average to poor performance. Jumbo Sports is gone. Gart and Sportmart have merged Hibbett’s good regional sales growth has continued but its stock price is off 40% from its May 1999 high. Galyan’s has split from Limited and the big players, Sports Authority and Oshman’s have continued their course. Some regionals remain, such as Dunham’s, and sports apparel chains such as Dick’s and Bob’s continue modest growth. Footwear and related apparel have posted a relatively weak year and it’s taken a toll on footwear players like Just For Feet and Footstar as well as the sporting goods mass merchants. And now e-commerce! Fogdog Sports and MVP.com represent high profile new entrants, just to name a few, while brick and mortar retailers, manufacturers and catalogers heat up their entrées for direct consumer consumption (e.g., footlocker.com, nike.com, dsports.com, thesportsauthority.com, REI.com, Riddell.com and Varsity.com). E-commerce provides both another means by which to shop traditional stores’ assortments and a way for some players to create smaller, segmented, more specialized niches than can effectively be created by building stores. What can we learn from all this and more importantly, what can we do about it in the year ahead?
Where have we been during the 90’s?
It’s clear that for most industry players they buy, present and sell an assortment of highly recognized vendor branded goods, from apparel to footwear to equipment. Certain stores occupy stronger or weaker market positions due to their real estate density, quality and time of possession on a market-by-market basis. Many of these store chains, however, generally lack their own identity… an identity that is theirs and not that of the vendors whose goods they sell. These chains tend to reflect what has occurred in department store retailing as a result of consolidation and focus on cost cutting and inventory turns – homogenization. However, unlike the department stores, there has been little brick and mortar consolidation in sporting goods to create a truly dominant national player producing top-flight financial results.
The answer may lie in ………………….!
Differentiation!!! Create differentiation. Create top-of-mind awareness. Create a point-of-view. Perform editing for your customer. Stand for something. Stick with it. Send consistent cues. Make your store and your auxiliary distribution mechanisms (catalog, e-commerce, etc.) important.
Reprint from SGB, March 1, 2000
Creating top of mind awareness of your store, and being viewed as an authority on your business, will be a key success factor in the new millennium. Being first in a category, a format, or in a real estate venue isn’t enough. New media and increased media coverage, new technology and new distribution channels make it increasingly easy to copy and even leapfrog a leader.
What we all seek now is “lasting enterprise value”, or a sustainable successful business. As in the past it takes execution, intense hard work, attention to detail, and attention to a changing customer, in short:
Spot trends quickly;
Apply trends to your business, often by thinking outside of the box;
Determine what trends are commercially viable to exploit;
Apply trends in a flexible store environment that permit inexpensive change in the future;
Now, about spotting trends…. It takes intensity applied in a manner that is formal, focused and fast.
The trends this process identifies must then be brought to your business “context”… that means your business must know itself:
- What business are you in?
- How do you execute your business?
- What differentiates your business?
- Do you have the right infrastructure, controls and management to be successful?
- Do you perform well?
Reprint from SGB June 5, 2000
Every retailer seeks to offer outstanding customer service. Millions have been spent on the latest “buzzword” laced programs developed and run by zealous HR and store operations operatives. Many companies have dispatched throngs of personnel to Disney and other seminars and training projects pledging to return immediate impact on sales through friendly, knowledgeable, courteous and prompt service. Countless hours have been consumed to train, brainwash and indoctrinate unwilling, un-motivated, non-believing people in the ways of the retailer and its commitment to outstanding, customer service.
What does it all mean? Why do we still do it? What can we learn from the past and from our wasted capital? What and who do we admire for its service and why?
What remains valid is the retailer’s continued desire to:
- win and retain customers
- meet or beat service expectations
- build a consistent image in the customers mind
- create long-lasting top of mind positive awareness of the business
In this column we’ve focused much attention on branding of store and creating long-lasting enterprise value. We’ve looked at businesses that have achieved “store as brand” identity. Most if not all have good customer service in the eyes of the consumer, whatever the definition of good may be.
Reprint from SGB (August 23, 2000)
Establishing and maintaining customer relationships has always been crucial to a retailer’s success. But now, more than ever, companies have realized that in order to succeed in the information age, they must do more than offer generalized coupons, promotional events and price discounts. Consumers around the world want to quickly find the merchandise they want at an attractive price, in-stock, and they want to be recognized and feel that they can consistently rely on that organization. In short, the consumer wants to be a retailer’s main priority. What better way for a retailer to do that than through knowing the customer. Call it data mining, customer relationship marketing or whatever the current “buzzword” may be – the bottom line is knowing the customer to direct your offerings, your store and your service to the customer’s needs and desires.
What is data mining?
This is a process by which organizations compile personal, pertinent, actionable, information about the purchasing habits of their current customers as well as potential customers. Traditionally catalogers, who had no other way of getting to know their customers, used “data mining”. The concept spread quickly, becoming a necessary way of doing business in every facet of the global economy. Organizations around the world are now realizing that knowing their customers behavior, thought process and demographic profile is one important way they can establish competitive advantages and create brand awareness and brand loyalty over the long term.
How is Information obtained?
As consumers, we are often bombarded with unsolicited mailers and surveys (in-store or phone) that may be viewed by some as intrusive. With privacy concerns on the rise, many organizations have had to rethink their data-gathering initiatives. The Internet has however spawned new and unique ways of accumulating consumer information. Most importantly, it allows consumers to freely, on their own time, relay personal information about themselves. It is believed by many that the key to direct marketing is to collect information when the consumer wants to communicate it, and not when companies feel they want it.
Reprinted from The Columbus Dispatch
Lawsuits run amuck. Julie Roehm alleges Wal-Mart’s CEO violated company ethics rules. Wal-Mart filed a defamation suit against Roehm and her two Michigan law firms. Alleged gift giver to Lee Scott, Irwin Jacobs, filed a defamation lawsuit against Roehm.
Does not Wal-Mart have bigger fish to fry? Legal and press battles continue regarding employee matters and initiatives to build stores in communities opposed to Wal-Mart.
Q1 profit rose 8.1% due to international sales gains and cost cutting, but US sales (over 75% of WM revenue) weakness persisted in home-décor and higher-margin apparel, outdoor equipment and sporting goods. Q2 estimates put profit at the low end of the range with comp store sales in the 1-2% plus range. Wal-Mart faces general economy factors of a slowing economy and weak home sales. Also its low-income customers have been hurt by high gas prices. WM inventory has risen sharply, probably in part due to apparel, its resumption of price-rollback marketing has not boosted sales, and gross margin rate of 24.4% is lower due to mix shift to food and drugs and reportedly shrink.
Granted, May comp sales continued to show a split between customer strata:
Luxury retailers fared well
Moderate customers slowed down spending
Lower end lagging due to reduced spending power
But strong performance still exists in the moderate (Kohl’s) and lower (Target, TJX) segments where they offer more than the price-driven pure discounters.
The Wal-Mart response? – Financial Services. Given it won’t get a bank charter WM is carving out floor space for its existing financial services (check cashing, bill payment, money transfers – all non-banking services that were at customer service desks) that exist under “MoneyCenters” in about 170 of its US stores. WM has committed to further pursue non-banking services that fit its customers that are “unbanked” (little or no access to banking services). WM’s President-Financial Services stated that 20% of the US population fit that description and are well-represented in WM’s customers (42% of WM’s shoppers have household incomes under $40,000 – the low-income and immigrant populations). This initiative at least focuses on the WM bread and better customer (lower income, ethnic) and some (Mexican/South American) may fear true banks due to their experience with devaluations and government disruption. See insert below:
Wal-Mart to expand financial services
By Abigail Goldman, Times Staff Writer
June 21, 2007
Wal-Mart Stores Inc. said Wednesday that it would dramatically expand low-cost financial services such as check cashing and money transfers for its millions of customers who don’t have bank accounts.
The giant retailer, which this year dropped efforts to formally enter banking amid opposition from Congress and regulators, said it would open 1,000 Wal-Mart MoneyCenters by the end of next year, up from about 225 in stores now.
Fair-lending advocates and others questioned Wal-Mart’s intentions, saying the company may be trying to pursue a back door into banking because the front door was blocked.
“Do you really want to concentrate all that economic power if they make that transition into full banking?” asked Stephen Andrews, chief executive of the Bay Area’s Bank of Alameda. “The Senate and the House throughout time has said no.”
Wal-Mart executives, however, said the company would be providing a much-needed service at a significant savings for its customers.
“It is right at the heart of a need of our customers — we have so many customers who are outside the mainstream banking system,” said Jane Thompson, Wal-Mart’s president of financial services. “We know we can add value to their lives and also save them money.”
In California, check cashing can cost as much as 3% of the amount of a check. That means that a worker whose take-home pay is $25,000 a year could spend $749 annually to cash weekly paychecks — a service that costs nothing for someone with a free checking account.
At Wal-Mart, which charges 1% for check cashing — with a maximum fee of $3 a check — that same worker would pay $249.60 a year.
Money orders typically cost 75 cents to $5 in California, said Alan Fisher, executive director of the California Reinvestment Coalition. At Wal-Mart, a money order costs 46 cents, the company said.
Wal-Mart, which processes more than 2 million financial-service transactions each week, has long sought to expand the business.
Transactions including money transfers, check cashing and bill payment offer a profitable new business for the company that in recent years has suffered from slumping sales and a bruised reputation.
The MoneyCenters are the most profitable part of Wal-Mart’s stores, Thompson said.
Just as importantly, the services give cash-strapped consumers — a big part of Wal-Mart’s customer base — new reasons to come to its stores.
The centers are open 7 a.m. to 9 p.m. seven days a week, an important benefit for workers who can’t take care of personal business during banking hours, Wal-Mart said.
“While we believe these initiatives, given their size, will not materially boost earnings in the near-term, we do see them as a positive long-term driver of customer loyalty,” Goldman Sachs analyst Adrianne Shapira wrote Wednesday in a note to clients.
In the face of strong opposition, Wal-Mart this year withdrew its application for what’s known as an industrial loan company, the retailer’s fourth failed bid to open a bank since 1999.
Although the Bentonville, Ark.-based retailer said it would use the bank to save on credit card processing fees and other back-office transactions, critics including banks, farmers and real estate firms contended that the company was looking to put a toe into retail banking.
Wal-Mart’s announcement on Wednesday is a smart sidestep around that issue, said Richard X. Bove, a financial institutions analyst at Punk, Ziegel & Co. in Tampa, Fla.
“Wal-Mart simply made the decision to do the things legally available to it without seeking approval from Congress or any other entity,” Bove said. “I think it’s brilliant. It makes a lot of sense.”
The company also said it would expand a pilot program that offered a Wal-Mart/Visa reloadable debit card, issued by GE Money, to 1,300 stores by the end of June and to all of its more than 3,300 U.S. discount and Supercenter stores by the end of the year.
Wal-Mart’s MoneyCard, which costs $8.94, requires no credit check or bank account and can be used immediately after activation.
The card carries a monthly fee of $4.94, which Wal-Mart waives if customers load at least $1,000 on the card in a month. A reloading fee of $4.64 is waived if customers add funds from a check-cashing transaction at Wal-Mart.
Funds on the card are FDIC-insured and money on lost or stolen cards will be refunded, Wal-Mart said.
Still, some community activists aren’t cheering for Wal-Mart’s financial services programs.
“Wal-Mart will offer cheaper check cashing, but not the full array of services that any neighborhood needs — mortgages, small-business loans, the kinds of things that are going to jump-start the economy in these neighborhoods,” said John Taylor, chief executive of the National Community Reinvestment Coalition.
“What needs to happen is that banks need to be putting payday lenders and pawnshops out of business and making these banking services affordable and available to poor people,” Taylor added.
The fact is that Wal-Mart has saturated the US marketplace, new store additions tend to cause sales transfer (cannibalization), the US economy is maturing, population is aging,
and wholesale clubs may be a better alternative for some economically impaired large families.
Visit a Wal-Mart store – operating standards are quite different than in the Sam Walton days. Yes the stores are larger, there are more of them, and the assortments are broader. But, consider other factors the customer sees:
poor housekeeping standards
minority customers, minority cashiers (reverse discrimination)
store difficult to shop (large stores, long distances)
salespeople virtually non-existent, unfriendly, slow to respond, not-knowledgeable (the best time to shop WM is at 3am when the stocking crew is hard at work – they know where everything is located)
store management totally invisible
And, to heighten the challenge WM can’t expect economic help:
Likely soft fall 2007 – high gas prices, soft home sales, inflation and uncertainty on interest rates dampen spending
Inventory accumulation (due to softer than expected sales) by retailers cause markdowns that will hurt regular business and planned promotions…look for aggressive promotions in fall
Food bill rising with CPI food index up 4% year on year and 6% in last three months. Don’t look for food and gas to subside
Consumer spending in the process of slowing….energy costs represent 9% of consumer expenditures for US households and higher for lower income segment (increased cost of necessities)
Political uncertainty – Presidential election and affect of change given unclear direction and positions of candidates
Younger population segment have rent/interest/housing taking increased percent of income. If interest rates rise look for layoffs and this group will be affected
Wal-Mart needs to focus on retailing basics and its core customers, with enhanced customer service, inventory cleansing and positive press that flow from performance excellence.
Thomas H. Hicks
Renaissance Partners provides a full suite of financial and strategic advisory services including corporate renewal, turnaround and crisis management, performance improvement and guidance in the fund raising process for a wide range of clients throughout North America.
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Connecting Angel Investors with Entrepreneurs!
Tuesday, August 17th
“Turning Around An Angel
Investment – What Are The Options?”
Abacoa Golf Club
105 Barbados Drive
Dinner is included with all registrations. Advance paid registration is $35 for Members and $75 for Non-Members by credit or debit card. Registrations the day of the event, including at the door, is $45 for Members and $85 for Non-Members. Credit cards, checks, and cash (exact amount) will be accepted at the door. Advance registration closes at 6:00 p.m. the day before the event. Cancellations received by 6:00 p.m. the day before the event will received a refund of the registration fees paid less $10.00 for administration and processing. Otherwise no refunds.
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Register or visit on-line at www.AIFFL.org