Target

On the surface, embedding 750 sq. foot Disney Stores in 25 Target stores starting next month, with another 40 planned a year from now, is a win-win: It’s a great differentiator for Target, gives Disney properties further exposure, and guarantees additional distribution for some licensees’ and Disney Store-exclusive merchandise.

But:

• To what extent will Target’s Disney shops siphon business from mall-based Disney Stores? The Target outlets will have 450 SKUs — 100 of which are exclusive to and available in Disney Stores. Does that mean the other 350 will be available elsewhere anyway? (Stand-alone Disney Stores have long claimed 90% or so of their selections are exclusive, though similar items are often available elsewhere.)

• Will Target customers in areas where there aren’t embedded Disney Stores feel unloved? Is there room to roll out the concept to Target’s 1800+ stores in North America?

• Is there a saturation point for Mickey/Star Wars/Marvel/Princesses/etc.? Is the consumer complaining that those properties aren’t ubiquitous enough?

• The release says Target will manage these store-in-stores. To what extent will the mass retailer be forced to showcase whatever Disney wants to promote — regardless of how well it does? If a movie is a clunker, can Target yank that merchandise out of its Disney Stores the way it does when such a property is displayed in the regular assortment? (Who needs who here? Technically, the answer is no doubt “Yes.” But the reality is it’s a business of relationships, and will Target want to risk displeasing Disney?)

• What impact will this deal have on Disney licensees’ relationships with other retailers — Walmart in particular? Will Walmart stop selling/reduce the amount of licensed Disney merchandise it stocks in stores where there’s a Target-Disney nearby? Or is Disney so critical at this point that it doesn’t matter (that could well be the case).

Let’s not forget Disney overbuilt its Disney Stores, sold them, then bought back the scaled down version. The Warner Bros. stores went through a similar experience, albeit without the range of properties Disney has amassed: Initial exclusivity at a very limited number of flagship Warner Bros. stores brought great results, so they overbuilt, overexposed the merchandise, and lost the cache. Warner, however, never got back into its own retail operation.

Walt Disney the man was a consummate marketer. He rotated his animated films out of circulation for seven year periods, waiting for a fresh audience before re-releasing them. That continued through the early years of home video, when Disney put its videos “in the vault” and then re-released with fanfare. (Now they remake them and/or add new titles to the “franchises.”) Even individual characters were promoted and would then take a back seat for a number of years. Mickey never disappeared, but he wasn’t always the focus of Disney marketing efforts. Some years it’s Minnie. Or Donald. Or even Goofy!

Today, the theory seems to be everything out there all the time: As many new movies as they can crank out for each “franchise” to bring home the box office and merchandising magic of quarterly growth for The Street. 

Is there no rest for the consumer?

NEW YORK, NY; August 8, 2019—The themes articulated through nine very different presentations at The Robin [Lewis] Report’s 10^th annual Retail Radicals forum at Columbia University were consistent to a fault, with overlapping examples (often humorously so), and a common outlook despite the presenters coming from divergent sectors of the retail industry.

The themes:

• Detrimental impact of reporting comp sales figures;
• Pressure for unrealistic quarterly growth to satisfy The Street;
• Reliance on spreadsheets rather than shopper realities;
• Delivering “local wonder;”
• Growing value of peronalization/customization;
• Decline of the most basic customer service;
• Integration of online-offline shopping;
• “Experiential” shopping.

None of these are new, but in an environment (which no one needed to emphasize to this audience, and no one did!) where store closings compound hourly, the need for more-than-cosmetic change is accelerated, and the perspectives of the speakers, and how they supported their points of view, provided multiple lenses through which to build toward the future. And while The Robin Report, and this event, are focused primarily on apparel and accessories retailing, the insights of the day apply across all sectors.

A Dose of Desperation

Witness the success of online apparel rental companies, represented at the conference, in separate presentations, by CaaStle’s Christine Hunsicker and Rent the Runway’s Gabby Cohen. CaaStle provides subscription model apparel rental infrastructure for retailers including Ann Taylor, NY&Co, Vince, and others. Rent the Runway aggregates apparel and accessories through purchase or consignment from multiple sources and rents items on an occasion or subscription basis.

“With new business models you need a little desperation,” says CaaStle’s Hunsicker, in order to prod senior management at traditional retailers (or anywhere else) to take chances. Similarly, Paul Charron, former CEO of Liz Claiborne, speaks of the “challenge of disrupting without usurping the prerogative of the CEO.”

On the difference between bricks and mortar selling and online rental: “Everything rents; 6%-7% of your [rental] customer base will have your worst-selling garments in their closet,” says Hunsicker. “The most important consideration for the renter: ‘Do I like the photo enough to have it?’”

By Hunsicker’s count, CaaStle’s retailers will sell 2.4 items to the average customer a month — but the rental customer will go through 108 garments over 12 months.

“Customers are our mini-warehouses,” she adds. “If we’re doing our job right, only about 15% of our inventory is in our warehouse at any one time.”

To retain customers, a retailer’s online rental operation needs to add “at least 50 new SKUs a month.” Ann Taylor, she says, introduces 150 new SKUs to its stores and rental system a month. But she also distinguishes between an Ann Taylor, which uses rental to add new, younger customers to its client base, while a retailer such as NY&Co, at least initially, sought only to monetize existing inventory that hadn’t sold through in its physical stores.

The ultimate business question: How long it takes to earn back the cost of acquiring customers. The goal, for Hunsicker, was 12 months. Netflix, she says, takes 20 months. “For traditional transaction brands [going to rental] it’s been two months” for CaaStle clients (CaaStle is only about a year old).

Rent-to-Buy

What of rent-to-buy? “It’s price dependent; 25%-30% of revenue from consumers is buy. At Ann Taylor, where the base monthly rental fee is $95, buy is a 30% kicker.”

With CaaStle, the retailer retains ownership of the inventory while CaaStle warehouses and services (processes orders, dry cleans, etc.). This differs from Rent the Runway, which usually owns its inventory, but, as mentioned, sometimes works on a consignment basis.

CaaStle is adding its first men’s brand this month with Scotch & Soda. “Men are more open to new business models,” Hunsicker says, “but it’s one chance [the clothes need to fit/look good] or they’re out.” Two more men’s brands are in the offing.

At Rent the Runway, Cohen says the company is building a drop box network for returning items, which would speed turns. So far Rent has installed about 25 at WeWork locations and at seven Nordstrom stores. Earlier in the afternoon, Columbia University professor and past C-level retailing executive (Sears, Lord & Taylor, Gap, others) Mark Cohen derided the announcement that Kohl’s is installing Amazon returns centers in hopes of building foot traffic.

Rent is also adding offerings that people “don’t need to keep or store,” such as kids’ apparel (they outgrow quickly) and skis.

Integrating Retail Into Lifestyle

Successful physical fashion retailing is “not about racks and racks and racks of apparel,” says Kevin Roche, of retail design firm Woods Bagot and a nine-year veteran of design for LVMH.

Roche sees continued “integration of office, living, retail, entertainment, sports” in uniquely designed spaces, and a need to incorporate “tons of technology and touch screens” in bricks and mortar stores.

Luxury retailers, in particular, he says, should trim the number of their physical outlets. “There should be 5-8 Nieman-Marcuses,” he says, while large-scale redesigns should be more judicious. “You can spend $300 million to redesign a flagship like Macy’s, but that won’t impact your other 584 stores.” It’s different, he notes, if you’re Harrod’s and you have only one store.

Is Smaller Better?

What of smaller-footprint outlets ala Target and Nordstrom’s efforts? “Walmart closed 114 Express stores in 2018,” notes Columbia’s Cohen. “The customer may live in the neighborhood [and see it as a neighborhood store] but they still expect 200,000 square feet of merchandise,” says Columbia’s Cohen. Also from Cohen:

• “The off-price growth streak is over.”
• “Walmart has foolishly entered a race [with Amazon] that it cannot win. Amazon is a market place, not a store. Like it or not, Walmart is a store.”
• “Acquisitions add to a company’s efforts [to grow] as ceramic tiles do to a mosaic.”

If you have the opportunity to hear Mark Cohen in person, do so. While he is very entertaining, his store-by-store critiques are uncompromising, and I can barely touch on his prepared remarks let alone the adlibbed asides. Ultimately asked by an audience member who does retail well, he didn’t miss a beat responding “Costco,” then adding, as he thought, Amazon, Zara, and “Feldman Housewares on the Upper East Side, near where I live. You go in and ask for what you need and the woman at the register tells you what aisle it’s in or that they don’t have it and you’re better off ordering online. Mom and pop hardware stores have an incredible array of merchandise and offer the best customer service anywhere.” To which everyone nodded in agreement.

Slides below are courtesy of Mark Cohen:

Source: Mark Cohen, Columbia University

Alibaba’s Genie

The eye-opener for many, judging by the gasps as her slides went up, was Alibaba’s Candice Huang. Consider:

• Alibaba’s Singles Day sales event on 11-11 (all “1’s” for a shopping day designed for singles) generated $30.8 billion in sales in one day compared to total U.S. online sales of $24.2 billion over the five-day Thanksgiving holiday (Thursday through Monday).
• The platform boasts 700 million active monthly users who, if they stay with Alibaba for five years, place an average 23 orders across 132 categories and spend $1800 annually through the platform.
• With all the focus on China’s growing middle class, Huang says Alibaba has 100,000 users spending $159,000 each annually, though no one asked if that includes small businesses that might be making bulk purchases (think of the dollies of food items purchased at Costco by small restaurants and food carts and trucks).
• 59% of users are under 29. (Rent the Runway’s Cohen says median age for its customers is also 29.CaaStle’s Hunsicker says its sites’ core customers are 28-45.)
• Among Alibaba’s sites, Huang describes Taobao as a “superapp” from which customers can do general retail shopping as well as book travel, live entertainment, and other services — analogous to the shift at malls to offering more entertainment options in addition to traditional shopping.

Quote of the day:

• “’Focus group’ is a dirty word.” — Alexander Genov, head of consumer research for Zappos.

Note: Slide up top courtesy Christopher Timmins, Intel, which presented the The Robin Report conference along with sponsor SAP.

NEW YORK, NY: December 19, 2016—I’ve been formally asking marketers about the challenges and opportunities for the year ahead at least since 1988 (before that if you want to limit it to music, home video, and video games). And I’ve been fashioning the responses into an annual (more or less) Fearless Forecast ever since.

Truth is the answers haven’t varied much over the years. For the licensing community in particular, the overriding challenge: Securing the right retailers for new and old licensing programs. The opportunity: Hitching onto the Next Big Thing (challenge: before it’s too late).

The word clouds here sum up this year’s survey responses as well as the longer-term themes, and even give voice to some of the more existential concerns (e.g. “Is licensing still the right nomenclature to describe the business?”)

Licensing Challenges 2017

Licensing Opportunities 2017

Not wanting to prejudice responses, I deliberately did not ask about the implications of the U.S. election and growing nationalist sentiment in many parts of the world. Interestingly, no one brought those factors up unaided.

In conversations, however, when asked, it is clear there is concern about potentially stricter trade laws and how they might affect deal-making. Will IP owners and manufacturers hold off on some decisions — especially as they relate to B and C properties — until the dust settles and we have some direction? (Not a new phenomenon, even when there aren’t trade questions on the table.) Will there be greater focus on “made here,” in terms of origination of IP as well as manufacturing, wherever “here” may be?

More challenges:

1. Closing licensing deals takes six months at the very short end of the spectrum, with 12-15 months an unscientific median.
2. The move to “fast retail” that is spreading beyond apparel, challenging traditional licensing models.
3. See #1 and #2 above, and note the inherent conflict.
4. Managing expectations. There are very few seven-figure (let alone eight-figure) advances on licensing programs, and with the exception of a handful of high-profile entertainment and sports properties, precious few that will generate retail revenue of $10 million+ annually, certainly not in Year 1 or 2 shy of some major fad that would likely be short-lived. Yet IP owners new to licensing — and sometimes folks experienced in the field — invariably set those goals, only to be disappointed or to fail.
5. Figuring out who to push off the shelf in order to get on the shelf. It’s the most elementary question for any new licensing program. Even in the age of “unlimited shelf space” online, the fact is consumers go for the handful of best-sellers. As in traditional brand marketing, it’s the #1 and #2 in a category that account for by far the greatest percent of sales.

Consider: In a pre-Christmas Target tour, looking at licensed properties, close to 10% of the toy section was given over to Star Wars, and just shy of 5% for Marvel. Paw Patrol, Teenage Mutant Ninja Turtles, even Shopkins, one of this year’s hottest girls’ offerings, were about 1% each.

More opportunities:

1. Speed is of the essence. See #1, #2 and #3 above! The winner is he/she who can “turn it around” while the property is still hot — goes for the IP owner AND the manufacturer — and that can keep refreshing the assortment on a 3-6 week cycle rather than quarterly or semi-annually.
2. Be realistic. See #4 above. Always best to exceed expectations.
3. Giving retail the differentiators it needs. Not just a single “exclusive” SKU, but a program.

Here’s to 2017’s numbers being better than 2016’s. And to your own participation in marketing and licensing being more fun, more productive, and more rewarding in the New Year!