The Future of Retail, Fashion, and Data
The news rarely gets a break, and it just thrives on “issues” such as ISIS, The Donald, and illegal immigration. Retail has had its fair share in the spotlight, but here at BTA, we think it deserves, perhaps, a little more attention than it’s getting.
First Step: What’s going on?
Not unlike watching a Rex Ryan defense, there are times when we, as citizens, just have no clue what is going on. The headlines lately are surrounding Macy’s and Nordstrom, the faces of the big retailers who aren’t performing as well as they have in the past. Reports are circulating of drops in the stock market prices of large retailers following the Thanksgiving shopping weekend. Consumer confidence declined in both October and November, according to the Consumer Confidence Index (CCI). Bloomberg reported on November 24th that the CCI fell to the lowest in more than a year. While a good portion of that uncertainty is driven by lack of confidence in the job market, an overall insecurity about the economy in general prevailed in reports as well:
“Plans to buy durable goods, such as appliances and televisions, depended on discounts, the report showed. The share of Americans this month who cited low prices as a reason to purchase long-lasting goods was 45 percent, among the highest readings in the past fifty years, said [Richard] Curtin [director of the University of Michigan consumer survey].”
Gotta’ Stay Positive
As you may know, one of my favorite headers to use is “Gotta’ Stay Positive.” Why? Because staying positive is a problem-solving mindset. Macy’s CEO, Terry Lundgren, has that mindset, even if you believe that Macy’s has already seen the writing on the wall.
Macy’s and Nordstrom may be tempted to try to ignore economists’ worries and simply focus on their own lines of business. The Deutsches Bank, however, claimed as recently as Nov. 13 that the result of recent disappointments in sales in advance of the Christmas season could be a result of several effects: “Tourism weakness, warm weather, a focus on experiences/entertainment, consumers purchasing big ticket items (autos/furniture), and the Amazon effect have all been excuses for weakness across retail over the past few weeks.” Questions about healthcare costs or other economic dampers have floated around the discussion, and with these new November numbers, nothing really seems to have changed. Consumer confidence, for instance, has decreased since the above article was written, rather than increasing as predicted.
Now Macy’s CEO, Mr. Lundgren, says that the “department store death” has been exaggerated and that “If you saw the traffic when we opened the doors at 6 p.m., flowing into stores like Macy’s Herald Square, you’d say people definitely want to shop on that night and in a store like Macy’s. The store has reported, however, that its same-store sales declined for the third straight quarter. Nordstrom found similar results.
But not all retail is experiencing the same results.
When you’re strapped for cash, you spend less. That means you do what every Dad and Mom do across America, the same thing you used to roll your eyes at when you were fourteen: you look for deals. Don’t buy it, unless it’s on sale! Well that may be the new American economy…
Hayley Peterson at Business Insider writes, “US consumers have been trained to never pay full price for anything, and it’s crushing some American retailers. Shoppers started gravitating toward discount stores during the recession, and many have failed to return to shopping in full-price stores”
Macy’s and Nordstrom are attempting to adapt by opening new chains that try to mimic the same effect of the discount store by selling their merchandise at severe discounts. Nordstrom has seen 12% sales growth in their “Nordstrom Rack” chain, almost 9% higher than their full-price business.
The Data, The Inventory, and The Wardrobe
If you’ve seen Daniel Craig’s newest foray into the James Bond world, SPECTRE, you know that the bad guy is going for data collection, almost like Robert Redford’s character in Captain America: The Winter Soldier. What’s the point? Well, if you believe art can reflect the fears of the average person, then the threat of data collection is real, but it can also be an aid and savior.
“Fast-Fashion” such as H&M, Zara, and Forever 21 have not had the same economic blues that Macy’s and Nordstrom have had. Why is that? Data collection.
Take Zara’s for example. While other stores have been hit with giant inventory, Zara’s technique is to hardly stock up on inventory at all. Keep it small. Keep it simple. Keep it moving. The Spanish company has apparently broken “a century-old biannual cycle of fashion now, pretty much half of the high-end fashion companies” — Prada and Louis Vuitton, for example — “make four to six collections instead of two each year. That’s absolutely because of Zara.”
Just for kicks, Zara’s founder, Amancio Ortega, is the fourth richest man in the world with a real-time net worth of 76.2 billion dollars, according to Forbes.
What’s important is that retail stores like Zara use data collection to discover different points of fashion and analyze trends so that they can anticipate what buyers will want. With a faster digital age, items like clothes become old fast, and by utilizing information (and by keeping a low inventory) companies like Zara can stay ahead of the curve and be very successful.
The lingerie store Adore Me even goes so far as to test whether or not to use brunette or blonde models, and have found that women respond much better to brunettes than blondes. (I am assuming the jury is still out on men!)
“For fast fashion retailers who are trying to churn out trends at an even more accelerated rate, utilizing analytics in an efficient manner is even more vital to their business model,” said James Green, CEO of Magnetic, a company that provides data to marketers, in a Business Insider interview.
Wrapping it Up
We’re wrapping a lot of things up now that Christmas is upon us, and we are mad for presents and gifts, so let’s wrap up this post. What, then, is the answer? Is it the weather? El Niño? Data? Business Models? Is retail dying? It is going to go Lazarus on us and come back?
A guy whose only sense of fashion involves buying the color blue (yes, me) is probably not the best place to go for an answer, even if I am a research analyst. The best place to go is to the American consumer…
That’s right, you. So, what do you think? Where are you going shopping this season? If at all?
As always, we at BTA would love to hear feedback from you!
Your fellow fashionable consumer,