Bifurcation of Retail

[BG2008]

Why do Costco, Best Buy, TJ Maxx, Ross Stores, Burlington, Five Below and other thrive while

 

Macy's, JCP, Bed Bath and Beyond, J Crew, Abercrombie, etc are failing? 

 

Search cost?  Not offering something compelling? Theories?  Anyone?  Anyone?

[ratiman]

With the exception of BBB, aren't the bottom group mostly enclosed mall retailers? And the top group is mostly off-mall?

 

[rkbabang]

Another thing about the bottom group is they are full priced stores, where the top group are more lower priced or discounted priced merchandise.  Although I don't know if that applies Burlington or Ross, because I'm not very familiar with either of them.  I do know that buying clothes at Abercrombie, J Crew or Macy's are a lot more expensive than TJX. And Bed, Bath and Beyond is always overpriced on everything they sell.  Costco basically sells at cost and makes money on membership fees.  It could be a consumer movement against overpriced retailers.  The internet making finding a better price easier to do maybe?

 

 

 

[Gregmal]

What's the difference between all of those? Whats the difference between a B/C mall and an A?

 

Location would be a good guess, but thats not it. Its all about experience and offering a unique proposition to the customer. Its the same reason why Chic Fil a is thriving. How is it that the majority of QSR joints still haven't figured out that young, cheerful, exuberant employees drive customer satisfaction? One of the few that has sells crap burritos to a cult following...CMG, and is currently killing it.

 

Put all those retailers side by side and the thriving all have unique offerings...great value, beautiful stores, vibrant and cheerful employees(who are well paid); then look at the have nots...disgruntled minimum wage workers, dark run down stores, overpriced junk stuffed in your face, and with regard to Abercrombie, douchebag teenagers with bad attitudes.

 

Dont think so? Well why do mall based Apple stores continuously kill it? People just as easily can go buy their iPhones online? Experience.

 

The idea that people are naturally social wasn't something I understood for a while. But when you look at things with that premise, you can see a way for a B&M retailer to take on Amazon. Some figured it out, others didn't. But Amazon cant compete with "its fun to go to the store"...unless of course, if they buy JC Penney.

 

I dont know if you've ever been to Woodbury Commons, but little else, especially for a family, can compete with walking around a beautiful park like complex, where everyone from the kids to the wife can duck into a store that has something of interest to them, then dine at any number of excellent restaurants, while casually taking in a gorgeous 75 degree sunny day. Now compare this to your average Tanger Outlet.

 

[rkbabang]

What's the difference between all of those? Whats the difference between a B/C mall and an A?

 

Location would be a good guess, but thats not it. Its all about experience and offering a unique proposition to the customer. Its the same reason why Chic Fil a is thriving. How is it that the majority of QSR joints still haven't figured out that young, cheerful, exuberant employees drive customer satisfaction? One of the few that has sells crap burritos to a cult following...CMG, and is currently killing it.

 

Put all those retailers side by side and the thriving all have unique offerings...great value, beautiful stores, vibrant and cheerful employees(who are well paid); then look at the have nots...disgruntled minimum wage workers, dark run down stores, overpriced junk stuffed in your face, and with regard to Abercrombie, douchebag teenagers with bad attitudes.

 

Dont think so? Well why do mall based Apple stores continuously kill it? People just as easily can go buy their iPhones online? Experience.

 

The idea that people are naturally social wasn't something I understood for a while. But when you look at things with that premise, you can see a way for a B&M retailer to take on Amazon. Some figured it out, others didn't. But Amazon cant compete with "its fun to go to the store"...unless of course, if they buy JC Penney.

 

I dont know if you've ever been to Woodbury Commons, but little else, especially for a family, can compete with walking around a beautiful park like complex, where everyone from the kids to the wife can duck into a store that has something of interest to them, then dine at any number of excellent restaurants, while casually taking in a gorgeous 75 degree sunny day. Now compare this to your average Tanger Outlet.

 

 

I found myself agreeing with you as I was reading this, but how do you explain Walmart?  Every rule has its exceptions?

 

[Gregmal]

My best guess at Wal Mart is its cheap as dirt, and basically a one stop shop for everything which is valuable from a time standpoint. Whole Foods is probably a good example of the anti Walmart. But they have all the other things mentioned above.

[KJP]

Why do Costco, Best Buy, TJ Maxx, Ross Stores, Burlington, Five Below and other thrive while

 

Macy's, JCP, Bed Bath and Beyond, J Crew, Abercrombie, etc are failing? 

 

Search cost?  Not offering something compelling? Theories?  Anyone?  Anyone?

 

I think you have two different groups in your "have nots".  I believe the Macy's/JCP group originally thrived by occupying a pre-internet distribution bottleneck.  They could charge full-price for a Ralph Lauren polo shirt because there was limited competition within reasonable driving distance.  The internet has de-bottlenecked distribution for consumer goods.  So, what purpose does a Macy's or JCP still serve?  What problem is it solving for consumers?  I also agree that the environment for many of their stores (e.g., dreary malls) isn't great.

 

JCrew and Abercrombie, on the other hand, are mass-market brands that are vertically integrated into legacy retail.  In theory, if their brands were strong, they should be able to succeed regardless of what the distribution channel is.  I suspect that, to the extent they are struggling, it's because mass-market brands go in and out of fashion, their price points are high relative to mass-market alternatives (weak brands?), and possibly they've got too many locations in outdated distribution channels.  The latter point would be the easiest to test -- do the stores in what we think of as "good" locations produce better economics than the stores in "bad" locations?

 

As for the haves you list, they are almost all low-cost with a likely "treasure hunt" strategy on top to give consumers another reason to actually go their stores.  Best Buy, on the other hand, seems to occupy a different niche.  Perhaps it's the last-man standing in a niche were at least a decent portion of the consumers want to see many of the goods before they buy them.  For example, if I want to go look at TVs, I'd go to Best Buy; I can't think of any other place close by that would be a better use of time in-person browsing time.  But if I want to look at clothes, I have too many options to list.

[ERICOPOLY]

My best guess at Wal Mart is its cheap as dirt, and basically a one stop shop for everything which is valuable from a time standpoint. Whole Foods is probably a good example of the anti Walmart. But they have all the other things mentioned above.

 

We can get our almond milk in a pack of 3 at Costco for the same unit price as buying 1 at Walmart.  And Walmart has no membership fee. 

 

Whole Foods is nicely tied to Amazon but we can't get a delivery time so what's the point?  They need to hand out a 'ticket' and text me for scheduling delivery when my ticket number is called -- dropping the ball here.

[vinod1]

Retail is still - price, selection, convenience.

 

Those that are doing well, Costco, Walmart, Target,  TJ Maxx, Ross Stores, Burlington, Five Below all provide goods at very low prices for those particular segments.

 

Amazon wins on all three respects on many items.

 

Macy's, JCP, Bed Bath and Beyond, J Crew, Abercrombie, are not doing well in any one these respects. Previously for some mid-quality brands these used to offer a good combination of price and selection in a reasonable convenient way (mall). Now all that is gone.

 

Employee pay, ambiance, etc I think are more of secondary effects.

 

Vinod

 

 

[rb]

I would say that it's not just up to the business. But it could be driven by the economics of the customer. What you're seeing is the middle of retail getting obliterated. The high end and low end are doing just fine.

 

Basically back in the 90s the middle consumer still had enough money to go into Sears, Macy's etc and spend money on overpriced crap in a nice setting. Same idea applies to applies to J Crew, Abercrombie, and others that middle brands that are struggling or no longer with us.

 

As that middle consumer starts to get squeezed they start looking for alternatives. It doesn't take that long for the consumer to find out that you can find the same crap at 1/2 price or 1/4 price in a bin at TJX or ROSS. Then the guy/gal that was going to Sears and Macy's despite the fact that they could pay more but they're cheap, or like to gawk at teenage girls give up and move upmarket as these places start to look a little depressing. Of course, the former group is larger than the latter group. In my opinion this started in the 2000s and then got kicked into overdrive in the 2010s.

 

Amazon is an interesting example that because of its non-descript version can be low market and up market at the same time. Selling both cheap shit and pricey stuff to snobs with the latest iphones.

[Jurgis]

The high end and low end are doing just fine.

 

Neiman Marcus is not high end enough anymore?

[Gregmal]

High end doesnt really matter if you dont differentiate your brand. Whereas a handbag maker can have a following, being a seller of generally expensive stuff isn't unique. Is there any real difference between Neiman Marcus, Lord & Taylor, Nordstrom, etc? They sell the same things as everyone else in their competitive peer group(and often competitors within the same damn mall) so what reason to people have to go there?

 

I'd probably even think it worth exploring how Barnes & Noble was able to transition some of its stores into cafe style libraries, hold social events, host clubs, etc, with reasonable success. Again, improving the customer experience.

[ERICOPOLY]

High end doesnt really matter if you dont differentiate your brand. Whereas a handbag maker can have a following, being a seller of generally expensive stuff isn't unique. Is there any real difference between Neiman Marcus, Lord & Taylor, Nordstrom, etc? They sell the same things as everyone else in their competitive peer group(and often competitors within the same damn mall) so what reason to people have to go there?

 

 

Nordstrom stands out for service.

[Spekulatius]

Retail is still - price, selection, convenience.

 

Those that are doing well, Costco, Walmart, Target,  TJ Maxx, Ross Stores, Burlington, Five Below all provide goods at very low prices for those particular segments.

 

Amazon wins on all three respects on many items.

 

Macy's, JCP, Bed Bath and Beyond, J Crew, Abercrombie, are not doing well in any one these respects. Previously for some mid-quality brands these used to offer a good combination of price and selection in a reasonable convenient way (mall). Now all that is gone.

 

Employee pay, ambiance, etc I think are more of secondary effects.

 

Vinod

 

You have to do something for your target customer really well or you are dead. The department stores are victims of their own mediocracy since they don’t do anything particularly well. I would even say most mall retailers fall into the same bucket. The Competition of most segmented retailers in a mall are not influencers with a website on the internet or online only retailers.

[kab60]

It will be interesting to see whether this acceleration of mall and B&M deaths will be a major tailwind for succesful retailers like Ulta Beauty. They might lose some competition while landlords lose leases and thus rents might be lower for longer.

[rb]

High end doesnt really matter if you dont differentiate your brand. Whereas a handbag maker can have a following, being a seller of generally expensive stuff isn't unique. Is there any real difference between Neiman Marcus, Lord & Taylor, Nordstrom, etc? They sell the same things as everyone else in their competitive peer group(and often competitors within the same damn mall) so what reason to people have to go there?

 

Nordstrom stands out for service.

 

I do like Nordstrom. But I do feel like the stuff is a tad on the expensive side. But maybe I'm just a tad on the cheap side.

[rb]

The high end and low end are doing just fine.

 

Neiman Marcus is not high end enough anymore?

 

Not sure about Neiman Marcus. Never shopped there. Maybe, as others have said, it had something to do with service differentiation. Why would you get a Prada shirt at Neiman Marcus instead of going to Prada?

 

On the flip side there is an retail chain in Canada called Harry Rosen. High end men's clothing. Only men. I love those guys. If I want a Prada shirt I totally would buy it from them instead of a Prada boutique. Excellent service and none of the snobby pretentiousness that you get in some of these places.

 

So I would say that it's not all macro stuff. You also have to run a business. Your competitors are out there looking to eat your lunch. Yeah, retail is tough.

[Jurgis]

So I would say that it's not all macro stuff. You also have to run a business. Your competitors are out there looking to eat your lunch. Yeah, retail is tough.

 

Definitely this.

[SharperDingaan]

Talk to your significant other .... 'shopping' is primarily entertainment.

The utilitarian stuff (groceries, gas, etc) is just that - utilitarian. Bought on price (Walmart/ Costco), minimum in/out hassle (parking, self check-out, etc), convenience (groceries-to-go. on-line, etc).

 

What's more entertaining? strolling an enclosed mall, or strolling the street-front?

If you thought mall, you're out-of-touch. YESTERDAY'S teenagers went to the mall for entertainment. TODAY, they are mother's/grandma's, and meet for coffee at that sit-down street-front coffee shop - the price of the coffee is about the same; the entertainment experience? completely different.

 

The chain-stores mentioned are primarily creatures of the mall, and 'mall culture'

Business models that are out of date, inability to evolve with the times, and collapsing under their own weight - long overdue. Put the space to higher and better use.

 

Technology is great, but value still prevails.

Common practice at many grocery stores; is to shop/pay on-line at the grocery store price, and pay $5 for drive-by store pick-up. $10-15 for timed at-home delivery, inclusive of orders from the store hot buffet. Both Friday-night dinner, & the week-end grocery shopping - reliably wrapped up for $10-15. Value.

 

Think about how you, and your parents/kids, actually shop? versus what is available in your area.

Bifurcation is primarily generational, the shopping 'delivery format' just reflects each generations preferences. Fewer people, buying fewer goods, at lower margin - and the mall dies.

 

SD

 

 

[fareastwarriors]

https://www.nytimes.com/2020/08/24/business/mall-short-hedge-funds.html

 

‘The Big Short 2.0’: How Hedge Funds Profited Off the Pain of Malls

 

As the pandemic accelerated the demise of some brick-and-mortar retailers, a group of investors profited handsomely from their travails.

 

 

[rkbabang]

Talk to your significant other .... 'shopping' is primarily entertainment.

 

My wife was just saying the other day that shopping isn't even fun for her anymore.  Walking around with a mask over your face, worrying about what surfaces you've touched, and sanitizing your hands, or the woman who just walked by coughing.  The dressing rooms aren't open so you have to buy stuff and try it on at home knowing that you will need to go back again to return it, so you decide not to buy anything at all and just leave...

 

[fareastwarriors]

Talk to your significant other .... 'shopping' is primarily entertainment.

 

My wife was just saying the other day that shopping isn't even fun for her anymore.  Walking around with a mask over your face, worrying about what surfaces you've touched, and sanitizing your hands, or the woman who just walked by coughing.  The dressing rooms aren't open so you have to buy stuff and try it on at home knowing that you will need to go back again to return it, so you decide not to buy anything at all and just leave...

 

 

 

I actually like shopping in person and I'm a straight guy. I don't do it more because the prices suck and right sizes are never available. Online I can always get a promo code or coupon with ease and I can go through a shopping portal or/and buy a discounted gift card for even more quick savings. In person, retail is not as easy although I sometimes find a eCoupon on my phone for them to scan or even print it before I go.

 

The sizes available suck especially for pants. I'm not that tall but sadly a bit wider :( . Like I'm looking for 32x29 or 32x28, not 30x30, not 32x30, not 32x32....and they never have those sizes in store!

 

Yes, retail need to evolve. Too many stores affording the same stuff at not great prices.

[Gregmal]

https://www.nytimes.com/2020/08/24/business/mall-short-hedge-funds.html

 

‘The Big Short 2.0’: How Hedge Funds Profited Off the Pain of Malls

 

As the pandemic accelerated the demise of some brick-and-mortar retailers, a group of investors profited handsomely from their travails.

 

“I’m definitely bearish on malls,” Ms. McKee said. “But I think it’s a very case-by-case basis. I don’t think all malls are dying.”

 

Well, well, well. Thanks Missy.