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Corra Consulting - NRF Reports, Oh Canada & the 2015 Consumer

20January

NRF Reports, Oh Canada & the 2015 Consumer

The Thread's Top Three:

1. U.S. Holiday Sales Rose 4%, Just Shy of Prediction, NRF Says. November-December in 2014 produced the best retail sales numbers in three years. Up approximately 4%, retail sales were just about in keeping with the industry’s forecast. Luxury sales were noticeably weak, and I haven’t been able to find an authority with a strong rationale for why this was so. In contrast, department stores that reported early, such as JCPenney and Macy’s, painted a rosy picture, and according to the NRF, home furnishings and electronics were among those classes of product that experienced the biggest lifts. What was behind their rise? Most would argue that it was not gas prices alone, but consumer sentiment and job creation as well. Here’s hoping it’s a trend that continues into this New Year.

2. Target CEO Knew The Canada Expansion Was Hopeless After He Visited The Stores For Himself. The mass merchant is pulling out of Canada and, to stay, simply would continue to cost them too much. Since opening the market, the retailer had invested more than $5.8b and reported quarterly losses between $169MM - $329MM. So, we’re left with one question really--why? First, I think it may have been, in part, a case of too much too soon. Target opened more than 100 locations all at the same time and in a new market. Many in our industry had remarked that the replenishment was lacking and, prior to the holiday season at least, the flow of goods left stores out of stock on critical products. Second, many have speculated that Target had gone off-course even in its US strategy. If the numbers did not bear out that this retailer had what it took to succeed with its existing US customer base, what’s to make us think that it understood the challenges of servicing a new one in Canada? From experience, I can say that purchasing behaviors are not at all the same. Third, the Canadian market is even smaller and simpler than the US. Wal-Mart essentially owns the entry level, but if you’re better than Wal-Mart but don’t have the offering of a Sears Canada, where should you be positioned? My opinion is “not where they were and much closer to Wal-Mart.” Lastly, how did Target grow so big and so fast? They built-out old Zellers’ stores, but Zellers was in a slow decline since the ‘90s and were not necessarily set-up for Target's US floor plans to just slot in. At the end of the day, maybe they had a chance with the Canadian customer at first, but we’ll really never know what could have been because that shopper never gave them a second or third chance. Whether it was due to inventory, market-right assortment, retail positioning or bad locations or a combination of all of the above, Canada was a costly experiment that has now come to an end for Target.

3. Top 10 consumer trends for 2015 from Euromonitor International. Personally, I always think this team is spot-on, and there are three of their 10 trends, in particular, which I believe bear even more careful observation. Consumers are busy and convenience matters--whether that convenience is a buy-local initiative or a product that confers convenience for how it simplifies the shopper’s life. So, think simple and not just “different,” product developers. Second, Millennials--generationally speaking--are the most diverse and educated purchasing segment any of us have likely encountered thus far; and this means that a “one size fits all” approach must largely be abandoned if your goal is to acquire them as long-term purchasers. They want to know that you know them and understand their personal needs; they raise the bar for all of us. Lastly, the rise of the “omnichannel” experience. There is a growing expectation on the part of shoppers that your brand be consistent in every channel (i.e., brick and mortar retail, catalog, e-commerce and mobile) and, eventually, will be in most every channel. My take, anyway, is that those with the most complete experience will win--shoppers will want to see, hear, touch and even smell and taste products in some instances. The big question will be: Will the most complete of experiences earn the most premium of prices?


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