Cost Plus Joins the Coupon Camp

Our friends over at Cost Plus World market are going the Borders Books route. Coupons may bring a small bump in new customer business, but ultimately they train your regular customers when to shop...and that ain't good.

Print it out and save 25%.

More details HERE

Opposite Day!

I spent the better part of last week listening to everyone on television and the newspapers telling me "we have reached the bottom!"

Since I was juggling so much over the past 10 days or so, I had no opportunity to ensure that the people that dwell in reality remain firmly grounded in the facts.

It seems that whenever the Dow Jones goes up, and it went up plenty last week, the bobble heads all start talking the "everything is alright" crap!

The reality is, as Nassim Taleb so brilliantly points out in The Black Swan, the stock market is not a snapshot of American economic health. Besides, I don't know very many "common" people that are still in the market these days, beyond your (required) 401k, I mean.

Here are a few of the Headlines you may have missed while collective noise from the Wall Street cheerleaders overwhelmed you:

1. Retailer Gottschalks is starting it's liquidation.
   
2. Ritz Camera starts liquidation on this Saturday.
   
3. General Growth Properties, the nations largest shopping center developer, is nearing bankruptcy.
   
4. Bankruptcy filings are up across the country by anywhere from 27% to some 86%, year over year, during MARCH!
   
5. 10% of the nation is NOW ON FOOD STAMPS! That's over 32 million people, and there is evidence of another 6-7 million being refused due to barely being above the poverty threshold.
   
6. Pier 1 announced it will close an additional 20 stores by the end of the month.
   
7. The City of Chicago is closing all it's mental health facilities due to budget shortfalls (Hey it worked for Reagan).
   
8. Blockbuster Video is near insolvency, with many (self included) seeing them fold before 2010.
   
9. Nevada based casino Bally's closed their Sports Book (operation for taking sports bets) last Tuesday, March 31, without warning...even to employees.
   

Now on a much more local note, Ethel's Chocolate is closing 5 of 6 "boutique's" BY THE END OF APRIL! With plans to close the last by the end of the year.

Lot's of bad news, I know, but it is only to ensure you keep your nose to the grindstone. The economy is literally just starting to reveal how far away we are from the bottom, not the bottom itself.

April began the "Period of Revelation", a three-month period of time, in which how badly scarred (or healthy) retailers are after a tough Holiday period and the worst 1st Quarter in roughly 40 years. Those that are in trouble will no longer be able to hide, as there is massive debt repayments due at the end of April and lots of capital needed for 4th Quarter purchases. Non-performers are not going to be able to secure loans and will summarily have to take a bow.

As earnings start rolling in at the end of the week, I will try to keep you abreast of the score.

Maybe I have had one too many "crabby-patties", but I think this is only the beginning.

Sak's Reacts...

To Costco!

The plot thickens, as the profit at a troubled retailer thins...

The Difference Between Coal and Diamonds is...

Pressure!

In our case, let's call it "Downward Pressure."

As a result of: 

being heavily inventoried

awful Holiday sales results

shrinking access to credit

Large retailers, especially those of the high-end variety, have not been able to order goods in their usual quantities from vendor partners.

This has created a boom in luxury goods at what I have coined as "echo-sites", defined as reputable retailers, usually restricted from carrying the brands due to the retailers discounting policies.

If one regularly reads the Oasis, this comes as no surprise, as the post-Thanksgiving business (or lack thereof), presaged this inevitability.

Last August TJX , the Marshall's and TJ Maxx parent company, announced plans to designate special floor space at each of it's locations to better spotlight the new collections previously unavailable to them.

And if that is not enough to convince skeptics, my trip to a Oasis fave, Costco, should do the trick.

While shopping at my neighborhood Costco in Chicago yesterday, The first table I encountered in the clothing area was stacked high with Ed Hardy t-shirts. These were not clearance peices, sent as one off, but piled high and 12 different shirts to chose from. 

What makes this development even more interesting was the price, an astonishing $31.99 for your choice of the shirts! The Nordstrom website has Ed Hardy t-shirts (while not exactly the same) for $106.

After collecting my usual food, book and hygiene needs, I noticed another table in the clothing area with an unusual amount of activity. Only this one had several women sorting though Seven Jeans. 

While the Neiman Marcus website features denim by Seven Jeans for prices ranging from $155 to (gulp!) $275, Costco sells 4 styles, all at $99.00! 

With the realities of the new economy becoming more clear each day, which of these three retailers seems better suited to deliver on their customer's demand for fashion and value?

Me too.

Many Happy Returns

I was reading Ray A. Smith's article (U.S. Retailers to Report Grim Results)  on the Wall Street Journal website regarding the much anticipated December retail numbers due out Thursday and something sparked a memory of an unusual experience I had yesterday. 

Allow me to share and expand.

I went to my neighborhood Costco (a retailer who's praises I have sung on numerous occasions) yesterday and, as I approached the doors, saw something I have never witnessed before, a line to get in.

Mind you, yesterday's weather in Chicago was in the upper 20's, maybe 30, maybe.

Yet and still there were about 8-12 people standing in an orderly line outside the store. As I moved closer and closer I noticed the line extended some ways inside the store as well.  While walking and searching my wallet for the always misplaced membership card required to enter, I started wondering if the few items I needed was really worth standing in freezing weather.

Just as I resigned myself to the idea, I noticed the line was not to get inside the store, but an extension of the "Returns" line that was now, literally, winding outside the store.

The sight of that line and the thought, sparked by Mr. Smith's article, drove home a point I had not considered, how tough January business is in the retailing business.

This January, much like this December, is sure to be perhaps the worst month for retailing in, excusing the hyperbole, modern history.

Three things are needed to make a Perfect Storm in retailing:

• First, an uncertain economy. A bad economy is one thing, but "better the devil you know", they say. In bad economy, people have already made adjustments and pared down their spending habits. In uncertain economy, which is really a bad economy where people refuse to accept that reality, people attempt to maintain their lifestyles regardless of how difficult the reality of doing so is. This leads to large spending expenditures, followed by mass returns, pawning and borrowing. Sound familiar?

• Secondly, you need swollen inventories. Swollen inventories take up room needed to show new goods, inhibit buying teams from investing in newer, more relevant merchandise and forestall payments to vendors, banks and other creditors. If you consider we just came through the worst holiday season on record, and 4th quarter is when retail inventories swell to their highest levels, inventories are now HUGE, everywhere. This is why you are seeing, "Buy 1 Get 2 Free" signs in place of, "66% Off" signs popping up in stores. They seem to be the same thing,and while the latter gives customers merchandise for 1/3 the price, the former gives customers merchandise at 1/3 the price, but additionally removes two more items from the store's inventory. Inventory is a major problem at virtually every retailer right now.

• Lastly, you need reduced consumer foot-traffic. This point is not as obvious as it seems. Of course January is going to be infinitely slower than pre-Holiday business. However this January is sure to be slower than most because of something I wrote about in November, the greatly reduced number of gift cards sold this past Holiday Season. Gift cards ensure future business, period. When customers decided to steer clear from purchasing gift cards over the holidays, the message was clear, "We are not sure if we will be back, or if you we will be here when we do." The combination of loaded gift cards and huge discounts would have made for a festive January in retailing, instead we have the opposite effect.
  

Coupling these three factors with record rates of merchandise returns brings the problems many retailers face more clearly into focus.

A Perfect Storm has descended on the entire retail landscape and will have a disastrous impact on this, the last fiscal month of the calendar year. Look for Thursday's numbers to be bad, and this month's numbers to only accelerate the inevitable thinning of the retail herd.

Best of Inbox 01.02.09

Here's the best nugget I found in my box today:

I can't believe I am saying this, but NOW is the time to make your move. 

95% off is less than free. Here is the math on my theory.

If item a is $100 and tax is 10%, then your cost to take it out the door is $110.

If that item is 95% off, the math is as follows:

$100 - 95% = $5 and 10% tax of $0.50, so you are paying $5.50.

That is 45% less than the tax you would have paid on the item at the original price.

So as Jean Luc Picard said best: "ENGAGE!"

Another Reason To Run...

From retail stocks.

The natural squabbles that arise in crisis are starting to play themselves out. However, this one is huge. Primarily because it deals with what has already happened, as well as the future.

A little known side of retail are the guarantees that vendors make with large stores for their profit margins. Retailers are more likely to buy more merchandise if they know vendors will cover the difference for the items that are sold under the agreed level of profitability, usually in the neighborhood of 40%.

This article (HERE) spells out the "war" playing itself out now between vendors and retailers, due to the tremendous, and early, markdowns taken this holiday season. The thing that makes this so critical is, this is the time of year retailers usually await checks making up the difference in the margins from vendors. This year the opposite is happening, with vendors negotiating to receive re-payment for the unprecedented discounting of their goods by several major retailers.

As Cotten Timberlake at Bloomberg reports:

If vendors succeed, they could recoup $1.2 billion from Macy’s, Penney, Kohl’s, Nordstrom, Dillard’s and Saks Inc. alone, based on analysts’ average estimated fourth-quarter sales of $24.2 billion for those six chains.   (emphasis is mine)

Which means, not only will retailers be hit by much smaller profit margins than anytime in the last 40-50 years, not only will there be no gross margin dollars flowing to them from vendors that usually guarantee those profit margins, but the retailers, after all this bad news is sorted out, will be making payments to these vendors, further reducing profits.

That may be the biggest story in retail so far to emerge from a season of big stories.

Keep an eye out.

Best of December Windows

Tiffany - North Michigan Avenue

Somehow, every month, Tiffany manages to pack more punch in their little 24" x 16" windows than most others get out of space 10-20 times in size.

Always different, always new and forward and always, ALWAYS brand worthy, meaning it meets the standard of "wow" Tiffany customers anticipate.

Take a look (click images for better detail):

Home Alone

From my inbox 12/30/08:

I cannot, for the life of me, ever remember a furniture store doing "additional" percentages off  on clearance. Usually it is a straight mark, with prices reflected on the ticket.

One thing that has always worked for the home market, is really working against it right now. That thing is long leads on delivery. When you ordered a sofa and it took 3 months to deliver that gave the furniture store plenty of time to resource and negotiate, thus ensuring maximum profitability. 

They are now faced with inventory showing up that was ordered in May, June, July, August and even early-September. This has caused a glut in inventory, leading to high storage fees and forced reductions on goods to get them out the door.

If you go 3 posts back on this blog you will see I predict very bad things for all things home, save the cookware category.

The main problem retailers are having now seems to be an enlightened consumer. Everyone knows prices are going to go down further. So those few people with money (and there are only a few) are sitting on their hands until after the new year to see where the pricing game goes.

It Begins!!!

From my 12/28/09 inbox:

There is no reason to panic, this is all expected...if you have been following the blog, that is.

Thinning Profits (and the Herd!)

The following are photos from my monthly walk along Michigan Avenue, Rush and Oak Streets. This two mile stretch has every store, covering every niche, in the entirety of the retail marketplace. What I decided to do is document what I saw, where I saw it and, just to get 2009 on everyone's mind, share what I think the fate of the particular retailer holds in the near future.

Before we start, please understand this very important fact:

With VERY few exceptions, when a store sells something for 50% off, they are losing money on the item. Yes, I know all about margin builders and the like, but those are a very rare exception in the overall assortment.

The reason for the loss is simple, here is an example:

Store A buys a dress for $40
Store A decides to sell the dress for $100 (a 55-60 mark being about industry norm).
If they sell the $100 dress for 50% off at $50 it would seem they made $10 profit, right?

Wrong!

Store a had to pay for the trip to New York for it's buying teams.
Pay for the paper to write the order on.
Pay the salary of the buyer that makes such decisions.
Pay for advertising, in-store signing and and the like.
Pay for medical, dental, 401k and other retirement benefits for their employees.
Pay for the real estate costs, insurance, design and fixture costs for their stores.

There is more: loan repayments, legal fees and market research, but you get the idea.

Such costs cannot be covered from that $10 profit, unless you sell hundreds of millions of those dresses (which is what Walmart is so good at).

That being said, the signs you see below should read as something out of SAW IV, not Happyland.

While this will bode very well for the consumer, it, quite literally, means the end for more than a few of these stores.

As always, all images can be clicked to get a larger, more detailed view.

Let's get it started:

This is Aldo, the shoe store that competes against 9 West when their goods are full price and Payless once they put their goods on sale. They are over saturated and overly dependent on mall traffic to drive sales. When was the last time you heard a friend say, "Hey, let's go to Aldo." I thought not. I see this chain closing 50% of it's locations, and/or seeking bankruptcy protection by May 2009.


Brooks Brothers will be fine. When the economy goes sour, people dress better. Even during the Great Depression this was the case. People without jobs wore suit and tie, just to feel a part of society. Brooks Brothers is an iconic brand that more than a few people will discover a other options from overseas start to disappear. Don't look for expansion, just look for them to make it through the economic downturn in one piece, which is sort of an A- or B+.


Walt Disney stores. During the Great Depression this company was hit so hard it had to do something radical just to remain relevant. What they did was start doing live action films, s Snow White and the like were not really meaningful after the war. This time, Disney is better suited for the though economic climate ahead. The acquisition of Pixar Studios two years ago gives Disney a foothold on smart, cutting edge filmmaking that not only deals with tough issues and ideas, but seeks them out. That being said, they SHOULD close their stores, but won't. Tourism to the Disney family of theme parks will plummet, so giving your child a little piece of Disney, if even in the form of a Happy Meal, may become all the more important. We'll see, but Toys, as a category, took a bath this holiday.



Sak's Fifth Avenue is going away. If not altogether, much like the sign below, 75% of it will. Someone has to convince me why not. See, you can't, can you? Saks has long thought itself Neiman's and run itself like Enron. If someone peeped behind the curtain, OOPS! you got us. This holiday season should pretty much end what has been a 6-7 year flirtation with a $5 stock price. Credit is tightening, so look for investors to pull of their roots and  go elsewhere. Sak's is nice, but not necessary. This will be one of the biggest, in name, casualties of this economic downturn. Obama Stimulus, or not.


Neiman Marcus is really in a class by itself. The brand represents the pinnacle of the American retail marketplace. They will benefit more from Saks' demise than anyone beside, perhaps, Nordstrom. Without the presence of Sak's, Neimans should see better gross margins due to not having to price match/ compete in many of their markets, which will lead to more profitability. Neiman's would be one of my real winners for 2009, save for one mistake...and it ain't small.

Why they decided to open up so many of these CUSP boutiques is beyond me. They are aimed at just the market niche that is most impacted by, first the housing collapse and now, the Great Recession. The combination of $600 blue jeans, $1800 driving jackets and long-term mall leases does not make for a good recipe for the future we face. This ultimately will be a VERY costly drag on the company and expect them to exit the idea entirely by the beginning of 2010.

BCBG, the retailer that never really was, will go back to selling it's goods in stores exclusively. For the life of me I cannot think of a more gracious thing to say, other than the sooner the better. 50% reduction by the beginning of 2010, perhaps entirely. They still have a strong, desirable brand for young adults, though.


Juicy Couture, in short will be in big trouble. Rapid expansion, usually means rapid reduction. Juicy has a great brand, but they are waaaaay overextended as far as different balls in the air. Look for them to rapidly shift to licensing, if that is an available option. Store closings and a return to being a vendor, not a retailer.



Yves Saint Laurent will be fine. I just wanted to illustrate the point that EVERYONE is on sale.



Children's clothing boutiques will be one of the first to get wiped out. Over the last decade no category has had faster growth and prices within this category have not been tied to anything sane. $100 shirts, $125 jeans and $70 t-shirts have become the norm from NEW DESIGNERS, not even luxury brands.

All things related to children will see growth, as people will think of their kids before themselves, but most Childrens boutiques will take a back seat to the Target's and Kohls's of the world. This has actually already started, evidence being the bath toy's took this December.



Home related stores are already in deep trouble (see Home Depot), though few really know by how much. To get a grasp of the outlook for this segment of retailing you need only one fact: January is the second most important month of the year for furniture-makers. So many home stores will go under within the first half of this year, survival will come down to how long you can hold on? If you can make it to July, and less than 50% will, you may have a chance at getting through the year flat. Habit will drive people to stores in the first quarter of the year, but I cannot think of a segment of retail so heavily dependent on credit, save automobiles. This obviously is a recipe for disaster.



Bye-Bye...



Those in the know understand why I included this photo, as a "sale" sign at this company is virtually unheard of. The early part of this economic downturn will benefit "stay-at-home" stores which related to: cooking at home instead of going out, watching dvd's at home as opposed to going to movies and buying liquor for home gathering as opposed to going out to bars and clubs.

What happens after the summer within these categories is anyones guess at the moment. If things start to rebound (which I don't see) they will maintain their balance. Though should there be no clear vision of an end to the downturn, look for them to be hit hard by September, complete with lots of closings and bankruptcies.



Not enough stores at MaxMara to have mass closings, but they will feel the realities of the economy, hardcore. Light inventory and staff cuts are in their very near future.



When you sell everything in your store for $20, as H&M does, you cannot survive by selling everything for $10. Margins are too thin at this company to help pay for what has been a very rapid expansion. Look for LOTS of store closings for this European company, same goes for Forever 21 and Charlotte Russe. Bankruptcy is not out of the question for any of them.



Let's be real. Borders is in big trouble. Not liquidation trouble, but trouble nonetheless. Immediate store closings after the new year, staff reductions at other locations and possibly bankruptcy protection for reorganization purposes. The good news for them is they have been putting out fires for 6-8 months at the company, so they are a bit further along in their planning than other retailers.



Ralph Lauren is on SALE!!!!! Run, don't walk!!! Their strong department store business will carry them for the next few years, one of the few companies with such a luxury.



Banana Republic (Gap and Old Navy) are in some very big trouble. Over-saturation in every market, irrelevant fashion assortments and long-range turnaround plans aimed at fashion, not efficiency mean bad news. Look for lots of closings, lots and lots of corporate lay-offs and a possible split of the company, which might be best. Banana, however, will be hit the hardest. It participates in the niche with the most competition, 20-40 year-old new professionals. Zara is going to dominate this market once it gets set with it's expansion, Express has more money and focus (though they are already suffering) and their clientele is already starting to dip into the XXI's and Junior departments at larger retailers in search of discounted merchandise.



Bye-Bye Talbot's! I don't see how they will emerge from this in one piece. Immediate store closings, immediate mass lay-offs and perhaps even liquidation.



As I stated earlier, Limited Brands (Express, Limited, Express Men) is going to take a significant hit. They have too many stores to begin with, but the fact they control the entire process (from design, textiles, maufacture and shipping) of everything in their stores may save them in the long run. Wexler is smart and visionary, so we will see if he was able to make the necessary adjustments to his machine before September, if not....ouch!



Very hard to write these words, but Crate & Barrel may not make it. I am a Chicagoan, so I grew up alongside this company. Going to the first store with my mother when I was small boy. That aside, the company has become less relevant with each passing year due to more copycats, with lower prices. In the movie It's A Wonderful Life, Clarence the angel tells George Bailey, "every time a bell rings, an angel gets its' wings." Well in the non-celluliod world, every time an Ikea opens a Crate & Barrel loses it's wings, or appeal.

I am pulling for you C&B, I just don't see how you emerge from this unscathed.



Ann Taylor closing are a given. Too many stores, reduction in clientele (less job holders means less clothes needed), loads of competition at every conceivable price-point and bloated inventory levels all point to bad times ahead. Look for quick moves to bankruptcy protection and, ultimately, a BIG downsizing by the middle of next year.



These types of stores (H20 and Bath and Body) are basically gone. They can only operate profitably when selling goods at full price, which is no longer an option. So take this test, will you spend the $15 you have on a new shirt, sweater, groceries or six ounces of green-apple bubble bath. Thought so!



The question for retailers like Levi's becomes, will their customer base continue to buy jeans from their boutiques at $90-$145, or start buying the lesser-weight versions from Kohls for $19.99-$40.00? I think the latter is more probable, so that is not good news for the store side of Levi's.



Ditto for Kenneth Cole. This is value-brand that has never been priced at value. So as a retailer, good-bye! As a vendor, you have a bright future.



Ditto Emporio Armani. The good thing for this company is there are not many of their stores to close, but close they will.

Stores that are not on Michigan Ave. that face major problems:

Sears - Kohls is kicking their butt and will continue to do so. Tightening credit means far less major appliance sales, less home-building means fewer tool sales. How can they withstand a double-hit like that in their two main areas of strength?

Macy's - Contraction is inevitable. Look for closings of 75-200 stores rather quickly. Bankruptcy is not out of the question, as they have massive debt payments due in the first half of 2009. Swollen inventories and lease obligations spell bad news.

All Jewelers - Contraction in this market will be unrelenting. A bad 4th quarter (-35%) will only make the thinning less merciful. Look for the elimination of 25-50% of all mall-based jewelers by June.

Mail Dominance

I thought I might share a few images from my inbox this morning. I expect this to be the norm going forward, not the exception.

I think everyone should sign up for e-mail alerts from their favorite retailers. Reason being, many of my favorites do not advertise in traditional (newspapers, magazines, televisions) manners to keep their costs down. Also, they are able to react quickly to market conditions. For example, Saks Off 5th regularly sent out alerts on deals that lasted for only a few hours throughout the entire Holiday Season. I took several people to the store and watched their jaws fall through the floor at the prices on everything from Prada to Zegna to Gucci.

If you are going to be a shopper, be an informed shopper.

Numbers Start To Trickle...

Retailers will not be forced to share Holiday numbers until the 7th of January, or so. However, the analyst's numbers have already started breaking, and all I can say is WOW!!!!!!!!

Must read article from the Wall Street Journal HERE.

This came in very late last night on Christmas Day, so I knew the news would be bad. The numbers actually play out in line with what I have been telling you for the last 7 weeks, retail got mugged this season.

The strange thing to come out of this report is how far off the actuals are from everyone's estimates. After Black Friday we were told, in spite of the photojournalistic evidence provided by yours truly, that "sales were up", and "things might not be as bad as expected."

Now that we are dealing with the staticity of facts, everyone is stating the obvious, this was one of the worst shopping seasons since the compilation of retail figures began.

The only thing scarier than these numbers is what lies ahead.

A Millie Here, A Millie There

"Final" October retail sales figures are out. There are lots of reasons it takes a few weeks to sift through the chaff to produce what really happened.

The good folks at Seeking Alpha (you should visit daily) crunched all the numbers for you and had this to say:

"Department stores are struggling the most, with specialty stores not far behind. Both are at their lowest levels in the history of the Bloomberg indices."

They are using the Bloomberg metric, so when they say "worst", they mean since 1992, which is still amazing because nobody compiled these figures as comprehensively before that time.

You can view the entire report HERE.

Funneling Information

Lunch is great. For me, business lunches are even better.

I have, for the last 2 years, hosted a monthly luncheon with eight retail managers from 4 major retailers and two specialty retailers. These casual affairs are generally an open forum, with my refraining from asking questions, allowing for conversation to flow more freely as opposed to shaped discussion. 

It is during these lunches that I have been able to forecast several retail trends, though strangely, those at the meetings have not had similar success.

 A sampling of such trends include:

• Tightening Credit- Almost everyone complained in April/ May about not meeting new credit goals.
  
• Death of Group Think - No longer were items driving businesses, bespoke is now everything.
  
• Guess Work at Merchandising Level - This had more to do with lack of strong item call from consumers.
  
• Trouble for Men's Categories - When most companies saw men's shoe business slow in October '07, the rest of the men's business unit was sure to follow. Which led to...
  
• Women' Career Clothing Issues - It took until the beginning of the Spring, but nobody doubts how devastating this has been across the board.
  

Having a group of highly-intelligent, business savvy merchants from so many companies is a luxury I wish upon any consultant/analyst. I am regularly blown away by the shear magnitude of useful information and ideas that come from our meetings. However, the meeting we held last Thursday was both illuminating and troubling.

It was the first time I felt the group was completely out of touch. Not with retail trends, but REALITY!

They spoke of "hiring up" for the holiday season, "loads" of new merchandise flowing into the stores, "huge" upcoming events that "were going to drive business" and the like. I decided to break protocol and ask a few questions.

1. Had any of the participants been told to watch their staffing levels, especially for post-Thanksgiving business?
   
2. Had anyone been talked to about the many challenges that lie ahead after the Holiday season?
   
3. Had anyone been given instruction this year that differed greatly from last year's game plan?
   
4. Had anyone seen a significant shift in the amount of merchandise arriving at stores so far this season?
   

The answer for each was a resounding and unanimous NO! I can tell you that I am not easily shocked, but this, literally, took my breath away.

The problems facing the retail industry right now are much akin to a Perfect Storm. An economy that has been progressively slowing, a severely tightening credit market, record household debt, record home-foreclosures, joblessness claims at record levels, new credit-card legislation on the horizon and public promising to spend less than the previous year for the first time in years. Perhaps worst of all, a high profile, historic election that distracted the entire public from these realities..., until now. 

Every major retailer has been disappointing with Sales figures for months, and most have done major downgrades on earning forecasts for the 4th quarter. All of this leads one to believe that the upper-level executives at these companies are aware of the tough environment they are facing. So the question that begs out is, why this sentiment is not being filtered down to the store level?

Keeping the stores in the dark may prove easier, or more comfortable, as nobody wants to cause panic at the disco, ultimately though, the lack of full disclosure will lead to less success this season and failure during the first half of 2009.

What can be done now? For starters, communication between the merchant teams and stores has to take place every day. Floor rotations and staffing levels should be worked out via team effort, and done to reflect short trend lines (3-7 days, max).

1. Buyers need to STOP BUYING! On hand inventory is the only important factor right now. If sales stay on the track they have been over the last 30 days, there is no chance you will have money or space for new arrivals come January. I have spoken with executives and store managers at several discount/ off-price retailers, the consensus seems to be that they have too much merchandise coming in right now. This is great for the discount chains (Filene's, TJX, Nordstrom Rack), but ultimately the reason for the surplus is bad purchasing decisions in the regular retailers.
2. Cut store promotions (wine & cheese, celebrity appearances/ signings), as consumers have shown this is exclusively a price-driven retail environment. 
3. The urgency within the stores, should be similar to what executives feel when they are expressing regret for the continual downward revisions of earnings estimates.
4. Focus of moving merchandise like the next seven weeks are your last in business. 

You may come out of this holiday season in good shape, ready to take advantage of the tremendous value on new spring merchandise sure to be awaiting the survivors.

There are too many analysts betting against the Retail Sector this season. The winners that emerge will do so stronger, and in better shape to meet the many challenges of 2009.

Delivering on the Promise

Specialty Retailers love to tell you how "special" they are. However, from the customers perspective, what makes a retailer "special" is the meeting your clientele's expectation of being introduced to genuinely unique merchandise, artists or designers, and on a fairly regular basis.

While cost-effectiveness virtually prohibits brick and mortar retailers from really knocking your socks off each time you visit, I am perplexed as to why more of them opt not to use their online presence to do just that, showcase something new.

Today I would like to share a couple of websites I visit often, CoutureLab and Portero. While they both speak for themselves aesthetically, I would like to share a few thoughts on why they both work exceedingly well from a (repeat) business perspective. 

CoutureLab is truly one of the most unique and satisfying retail destinations on the web. If you need a gift for the person who has everything, well don't buy that person anything! If you seek a special "job well done" gift for yourself, or for that very special someone in your life, CoutureLab is your destination.

Upon entering the website you start to get a sense that something, both unusual and fascinating, is one click away. Not because you hear the thumping soundtrack of a famous DJ's techno-remix, or the page somehow sways like wheat fields in a windstorm. No, the power in this site's introductory page is it's immediate insistance that "this will be different." Right on page one you are told the site offers custom pieces from their formidable stable of artists and designers. All the while images of unique, one-of-a-kind merchandise flies across the screen before you can fully grasp how awesome they are.

After choosing from a broad range of categories, you are instantly (and I mean INSTANTLY) aware that your are at a destination with an well-edited assortment of artisans unlike anything you are used to. Each page screams "I want it all". From the Bottega Veneta double-flap briefcase to Vincente Gracia's nest and serpent ring , the amount of care, patience and craftsmanship is readily apparent.

The CoutureLab site also offers many different views of each item, a full, detailed description of the merchandise (and artist most times) and one of the best zoom features I've ever played with.

But the true strength of CoutureLab is.... they are always FRESH! 

The first button you can click on the first page of the website is literally "new." And while lots of websites offer that feature, few deliver on the promise as frequently as CoutureLab. My faith is rewarded on each visit by an item I have not seen, or perhaps, a new artist or designer I have not heard of before. I am sure you will admit that being first in your sphere of influence trumps just about everything else.

CoutureLab delivers on the promise by rewarding me each time I take a gander to their site. This, most certainly, is a site you should be visiting on a quite regular basis.

Next up is Portero, or what I refer to as Me-Bay. That's because it is an eBay designed for the likes of Audrey Hepburn.

Now the founders of Portero knew very well, the leviathan that is eBay, sold everything under the sun when they decided to start this company a short three and one-half years ago. The also knew eBay sold almost every luxury goods label imaginable. But what the Portero team understood that nobody else knew then (or really even now), is that luxury can never be luxury if sold next to knock-offs, or amongst disreputable vendors.

So that is what Portero offers, AUTHENTICATION! 

That cannot be overstated in the circus of today's online retail marketplace. Every item sold on Portero is certified as authentic by an in-house category specialist, or in some instances, a certified vendor. So gone are the days of finding out your Louis Vuitton wallet purchased for  $7.45 for is not the real deal when you take it to the store for a repair.

Enter the Portero website and you are jaunted to attention. "I'm sorry, does that say Picasso for sale?", you think before the page even finishes loading. Indeed it is. This is your immediate signal indicating you are somewhere special, where luxury means luxury.  

You are then directed to choose a category, at which time you are inundated by the biggest names in luxury: Hermes (yes croco Birkins live here), Judith Leiber, Dior, Cartier, Chopard, Bulgari, Rolex, Jaeger-LeCoultre, Baccarat and Lalique. That warm sensation becomes hot flashes as you start to notice the prices. Yes, that is a Rolex Oyster Perpetual Datejust in black and stainless steel on bid for $2975, a full 40% off it's retail price of $5550! Yes, that is a Gurhan 24k Yellow Gold Hammered Marquis Pendant necklace on bid for $725, less than half the regular retail price of $1760! Two great examples of why this site is one of the fastest growing entities on the web, for those in the know are aware that rare are the times you'll find Rolex or Gurhan at a discount. Yet here they are.

And therein lies the allure of Portero. A steady stream of new additions to their pre-authenticated auction inventory. The best names in luxury, all new or gently used and at a  tremendous discount. You are now forced to visit on a regular basis, lest that Chanel Large Black Caviar Leather Tote going for less than half-price is still there. Thus, Portero is always delivering on the promise, of sustained renewal.

These are two retailers getting the most on two important fronts, repeat business and word of mouth. Each exceeding the expectations of  their clientele on every visit with something fresh, new and exciting. A business model that can be applied quite easily, given the proper motivation and leadership. 

Now that is what I call "Special."