best buy mobile

Retail's Deconstruction Eruption

I recently interviewed the principal of digital agency, Coexist, which has developed a platform that layers commerce capabilities onto the popular blogging and photo-sharing platform, Tumblr. Our conversation got me thinking about how hunter-gatherer platforms such as Tumblr, Pinterest, and Instagram are continuing a deconstruction and recontextualizing movement that is now manifesting in retail. Just as users of these platforms have turned appropriation and reassembly into an art form, the retail world is busting up, dissecting, and recombining elements that once seemed destined to remain in their original contexts forever.

For example, showrooming is really just the deconstruction of the previously self-contained in-store shopping process. Thanks to mobile apps, retailers’ walls are now permeable, and shoppers are researching, comparing prices, browsing, and purchasing at any time or place, and in any sequence.

Not long ago, retailer acquisitions involved retailers taking big bites of others and digesting them thoroughly. A prime example is Federated’s 2005 acquisition of May Company, and its subsequent decision to make its crown jewel, Macy’s, its national moniker. In contrast, Walgreen’s recent moves represent deconstruction at its finest. When it acquired Duane Reade in 2010, rather than swallowing the chain whole and folding it under the Walgreen banner, it maintained a separate Duane Reade banner, and wasted no time in deconstructing and relocating select assets. First up was Duane Reade’s DR Delish private brand, which Walgreen plugged into its stores simply as Delish. Duane Reade’s Look Boutique concept was also brought over to select Walgreen stores, as a major vault into the highly-competitive beauty category. The next phase will see Look Boutique serving as a home for brands that Walgreens plucks from Alliance Boots’ portfolio, after having taken a stake in the UK health and beauty group in June.

Retailers have taken to deconstructing their portfolios in order to blow out high-margin opportunities and grab bigger market shares in key categories. Best Buy is looking to open an additional 100 Best Buy Mobile stores, even as it shutters 50 of its big box locations, and its decision to carve out mobility products from the mix in its mainline stores may have been one of its best to-date. Best Buy Mobile stores currently generate 30 percent of the company’s profits, at a time when it is struggling to hold its ground with its legacy businesses.

Only a few months ago, Amazon seemed on track to becoming the ultimate virtual generalist. These days, it’s usurping Walmart as the opportunistic category killer to watch. Walmart has famously disrupted multiple categories that already had homes in its stores, including grocery, toys and entertainment, simply by paying more attention to them. Amazon’s recent rash of category-crashing plays in gaming, action sports, and apparel has it leveraging event marketing, sponsorships, and celebrity tie-ins to seize market share in offerings that would otherwise have stayed buried in its massive marketplace.

Clearly, the monolithic past of retail is splintering. Today, the parts, and how they can be moved around and reassembled, are more important than the whole.

This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) website.

Two Mighty Myths

Best Buy is the latest member of a growing group of retailers that have recently announced significant business overhauls. Clearly, retail is about to get a whole lot more interesting, as many of the majors, including J.C. Penney, Lowe’s, Kohl’s, and others make simultaneous big breaks from their pasts. Before the momentum builds any further, it’s time to debunk a couple of myths.

Multi, Not Just Mini

Retailers’ preference for small formats has gained traction, to the point where “small is the new big” is fast becoming a retail cliché – and one that begs for clarification. A bevy of big boxers, including Target, Tesco, Walmart, Best Buy, and J.C. Penney, are driving their store format portfolios in diminutive directions, but only one, Best Buy, is actually shrinking the size of its existing stores (by 20 percent in select locations). The majority of big box retailers’ store portfolios are still weighted toward, well, big boxes. Their small format forays have, by and large, been separate launches, like Walmart’s Express stores, J.C. Penney’s JCP Express concept in Chicago, Target’s City Target launch, or Best Buy Mobile, none of which have hit anywhere near the scale of their legacy footprints. For others, smaller versions of their original templates figure prominently in their go-forward strategy, but the revised versions are still far from tiny. Last week, for example, Kohl’s announced that its new store openings will be disproportionately tilted toward a version that weighs in at two-thirds of its original version. However, at 64,000 square feet, these new additions are far from “small” and at launch, they represent less than 1% of Kohl’s total fleet.

Takeaway: Consider small formats a trend, but, until wrecking balls begin banging away at a big box near you, multi-format remains the current retail reality.

Integrity and Clarity, Not Just EDLP

Who would have thought that a century-old, mid-range department store would create some of the biggest buzz in retail so far this year? J.C. Penney’s appointment of former Apple executive, Ron Johnson, to its top post was audacious enough – it’s his rip-off-the-Band-Aids renewal plan that has the retail peanut gallery weighing in right and left.

Penney’s pricing and promotions plan represents the most significant of its shifts in strategy, as it puts the kibosh on the shocking number of unique promotions it normally runs (almost 600 in 2011) in favor of a “Fair and Square” three-tiered pricing strategy. But don’t call it EDLP. Penney’s isn’t lunging to low prices, it’s meeting customers somewhere in the middle, between inflated markups on one end and rock-bottom clearance on the other. Ron Johnson summed up the situation by stating that "People are disgusted with the lack of integrity on pricing,” and he’s not the only one saying game over. This month, Stein Mart announced that it will reduce coupons by as much as 50 percent this year since, according to CEO Jay Stein, the company’s coupon strategy had gotten “out of hand.” In the wake of a highly-promotional fourth quarter, Kohl’s is working hard to make its pricing message“very, very obvious” to consumers as it moves forward, according to CEO Ken Mansell. Even the king of EDLP, Walmart, has made price consistency and integrity its dominant message as of late, while Lowe’s EVP of Merchandising, Robert J. Gfeller, has spoken of eliminating the “peaks and valleys” associated with promotions as part of its recent transformation.

Takeaway: “Value” and “low prices” are still very much in retailers’ vocabularies, but integrity and clarity are taking center stage.

This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) website.