Retail Consolidation The Continuing Saga

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Retail ConsolidationThe Continuing Saga!
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Retail Consolidation

• Cause / Effect
• - Whats driving retail consolidation?
• The Retail Landscape ( Next 5 Yrs.)
• - Survival Of The Coolest?
• Life Expectancy Of Labels Vs. Brands
• - Will the consumer figure this out?
• Small / Mid Sized Apparel Manufacturers
• - Where do they fit?
• The Vanishing Middle
• - Goodbye Generic!
• Generational Evolution of Apparel
• - Youth Meets Boomer!

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Cause / Effect - Whats driving retail
consolidation?

• The Taste Level Of America - Forever Changed
• - Thank YouMickey Drexler and the Gap
• Once Upon A Time
• Higher price points equated to better product
• Lower price points meant poor quality / no
  taste
• Now Its Good, Better, Best Vs. Cheap or
  Expensive
• The Consumer doesnt want cheap
• They want Good, Better, Best at a discount
• Added Value Isnt A Bonus
• - It is a requirement!

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Whats Different?

• Apparel is declining in importance to the
  consumer
• Lifestyle is driving apparel decisions
• Apparel must adapt and provide relevance
• Provide what they wantNot what they need
• Good taste is expected Good deal is desired

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The Changing Consumer

• Live Young, Work Young, Look Old
• - The Aging Boomer will not go quietlyDressing
  Younger is Cool
• The 40 yr old of 1981
• vs.
• The 40 yr old of 2006
• Single Biggest change
• Father / Son and Mother / Daughter all dress
  alike
• Price is the ultimate vehicle of change
• Price / Value equation much more important vs.
  past
• The 25-35 Year Old Consumer Has A Different
  Perspective
• Based on exposure to all outside influences of
  Media
• Grew up with different Tools (Instant Access)

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The Generational Shiftof Apparel For Consumers

• Effect of Younger vs. Older
• - Clash of lifestyle apparel choices
• Everyone looks good in a Suit and Tie
• - Casualization of America Men with no clue
• No one buys an outfit to go out on Saturday
  Night
• - Your Lifestyle dictates what you wear
• Households with children under 18 dramatically
  alter
• what parents wear
• Inherent awareness of whats cool / whats not

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Changes In The Game Today

• Technology
• - Warp Speed visibility to brand awareness -
  Good Bad
• Old Adage Better Product Better Taste Level
  Better Distribution
• - Throw it out the window
• - New School Cool product at lower price points
  in broader distributional channels
• Apparel Spending Grew In 2005 (4 2005 NPD)
• Mens Stronger Than Womens
• Lifestyle Segment Driven
• Price Factor Important more than ever
• New Consumer Profile Emerging
• Non Brand / Channel specific
• Buy what they want / where they want

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The Retail Landscape - Next Five Years

• The Dept. Store Format Stabilizes And Prospers
• - Federated / Macys streamlines and further
  separates from mid/tier and discount to create
  Reason To Exist
• Brand Direct Retail Over-Expansion
• Rush To Direct Retail
• Survival Of The Fittest Weeding Out
• One Dimensional Brand Retail Platform Fails
• Outlet Store Malls Re-Focus
• Good, Better, Best Brands Better Product
  Offering
• Less Outlet Private Label
• Neighborhood Niche Specialty Stores Emerge
• Non Mall Based Cool Stores Lifestyle Center
• Destination Locations - I.E. Abbot Kinney

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• Uncool Stores Cease To Exist
• Mass / Midtier Customer Once Identifiable
  Becomes Invisible
• Everyone Wears Cool Product
• Big Box Players Modernize Assortments
• Generic Product Gone
• Lifestyle Focus
• Picture Multiple Target Formats
• Transformational Brands Impact Retail Formats
• Think J.C. Penney / Sephora
• The Mall Reinvents Itself
• Plastic, Food Court, Non-Traffic Driven
  Retail Space
• Picture Farmers Market Of Apparel (Mixed
  Category / Real Life Experience )

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Cool Stores

• Costco
• Home Depot
• Victorias Secret

• Target
• Whole Foods
• American Eagle

• Best Buy
• Pac Sun
• Abercrombie Fitch

Common Thread

• Lifestyle Focused
• Clear Point Of View
• Category Dominant
• Modern / Relevant Business Model
• Speed To Market

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Retailers In Transition

• Federated / Macys Big Upside
• - Macys West Prototype Future Better
  Department Store
• J.C. Penney Big Opportunity
• - Transformational Brands (Sephora) Drive The
  Business
• K-Mart Big Question
• - Create Reason To Exist
• Walmart Big Challenge
• - Modernize Apparel Assortment And Add Brands

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Definition Of Brand vs. Label

• Versions according to Webster
• A name given to a product or service
• A type of product manufactured by a company under
  a particular name
• The name or trademark of a fashion company

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My Version

• Labels Have Recognition Brands Have Loyalty

• Labels Get Your Attention Brands Get Your
  Heart

• Labels Serve A Purpose Brands Serve A
  Consumer

• Labels Offer Value Brands Offer Value -
  Added

• Labels Trust Consumers Brands Consumers
  Trust

• Labels Are For Now Brands Are Forever

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Life Expectancy OfLabels Vs. Brands

• 3 Types of Labels
• Direct Retail Private Label
• Generic Vendor Label
• Niche Specific / Category Expert Label
• Direct Retail Private Label
• Continued Evolution Of Superior Price Value
  Equation
• Future Upside in Better Design And Quality
  Execution / Investment
• Specialty Retail Dominates Execution Vs.
  Department. Store / Midtier

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• Generic Vendor Label
• Vulnerable To Extinction
• Price Driven
• No Reason To Exist
• Niche Specific / Category Expert Label
• Future Is Bright
• Creating Expertise In Category
• Flexible Sourcing / Design Capabilities

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• 3 Types Of Brands
• Vertical Retailer
• Traditional Manufacturer
• Licensing
• Vertical Retailer
• 100 in Control
• Direct Access to consumer
• Best price / value equation
• Fastest Trend to Market Provider
• Sales Comps True Barometer of Success

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• Traditional Manufacturer
• Reliance on retail distribution
• Middleman to Consumer
• Limited control
• - Pricing, Point of Sale, Positioning
• Wholesale Sales growth
• (vs. Retail Sales Success )
• Licensing
• 3rd Party Control
• - Licensor to licensee to retailer
• Management of diverse licensee cultures One
  Voice
• Direct correlation of success
• - Degree of brand promise kept
• Brand Extension - revenue growth
• Difficult control
• - Wide variations Best to None

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Life Of A Brand

• 7 Stages Of Development
• Emerging
• Cool
• Aspirational
• Accessible
• Mainstream
• Declining
• Gone
• Direct correlation to sales volume stage of
  development
• The hotter the brand gets - The younger the
  consumer that embraces it.
• Define brand strategy before stage 4 (
  Accessible )

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Brands Today

• Adults Dress Younger - Less Serious
• - Subtract 10 years of age from your dated
  consumer profile
• Being Cool vs. Dressing Cool 2 Different
  Things
• - Cool Products exist at all distribution points
  vs. 5 years ago
• Remaining Separation Factor of cool Brands
• Tribe Differentiator
• Lifestyle Statement
• Price / Value Equation New Dynamic
• More choices to spend money on
• Apparel facing new competition

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The Vanishing Middle

• The Modern History Of Apparel
• 3 Parts
• Luxury / Premium
• Generic / Mainstream
• Mass / Commodity
• Educated Consumers Changing The Game
• Better Fashion, Better Quality, Cheaper Price
• Polarization Of Retail Landscape
• Direct Brand Retail Replacing The Middle
• Generic Product Rapidly Vacating Middle Tier
• Mass Getting More Sophisticated On A Daily
  Basis

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• The Term Moderate Department Store Is An
  Oxymoron
• Squeezed From Both Ends (Luxury / Premium
  and Big Box / Mass)
• Growing Trend
• Luxury / Premium Fashion Mass / Commodity
  Prices
• Generic Product
• Forces Consumer to search for lowest common
  denominator price point

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The Lifecycle Of The Small /Midsize Apparel
Company

• State Of The Union
• Highly Competitive, Price Driven, Lack Of
  Predictable Future / Long Term Status
• Forced To Compete With Large Public Apparel Firms
  ( Chargebacks, Allowances, Discounts )
• Increasing Margin Pressure
• 100 Of Existence Held In the Hands Of
  Retail Distribution Or Wholesale Brand

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Requirement For Survival

• Qualifications
• Strategic Plan
• Specific goals / objectives
• Proper due diligence
• Realistic diagnosis of the patient
• Time frame - you can live with
• Financial support to execute
• Tools
• Sub-Branding
• New product launches
• Multi-channel distribution strategy
• Category extensions
• Trade Advertising
• Exclusive brand extensions