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Do Department Stores Need A Makeover?

July 9, 2010

Do Department Stores Need A Makeover?

Do Department Stores Need A Makeover?

The Great Global Recession fundamentally changed the future of retail. It wasn’t the beginning of a behavioral shift; it was the end. And while the crisis may be over, the implications are not—especially for department stores, according to Wendy Liebmann, chief executive officer of WSL Strategic Retail.

Speaking at the Global Department Store Summit, Liebmann said, “Shoppers are now bloody-minded. Distrusting. Practical. In control. Many have changed where they shop and how—first through necessity; now through choice. They have gone from regretting what they couldn’t afford to accepting what they can. Less is more now, and it’s OK.

“The emerging retail world may look familiar, but it is not,” she continued. “New technologies mean that familiar department store territory is being transformed: service, exclusivity, access have all been redefined. The change is real and not going away any time soon. Department stores will be enormously challenged in this new environment. They must invent, yes invent, themselves if they are to succeed.”

Liebmann identified“8 ½” steps department stores must take to do just that—restate worth; think small; reframe value; embrace the internet; innovate discounting; reinvent service; romance the brand; seize the white spaces; and be bold or fail.

8 Steps Steps for Department Store Re-Invention
According to Wendy Liebmann, chief executive officer of WSL Strategic Retail, departments stores must:

1. Restate worth
2. Think small
3. Reframe value
4. Embrace the internet8½. Be bold or fail
5. Innovate discounting 6. Reinvent service
7. Romance the brand
8. Seize the white spaces

Liebmann’s presentation revealed the new findings and insights from WSL Strategic Retail’s 2010 How America Shops Megatrends Study, The Odyssey Begins to the New Retail World, including newly-published data on the U.S. department store shopper, along with global insights from How the World Shops. The study is based on a national online survey of 1,950 men and women. This is the 13th edition of the study.
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The Sweet Spot in Green Household Care

The landscape of the U.S. market for household cleaning products is undergoing drastic changes as consumers continue to adopt greener lifestyles. Because of continued consumer interest and understanding of greener and more sustainable lifestyles, the U.S. market for household and laundry cleaning products is well on its way to a major shift in marketing strategies, ingredient stories and
product innovation.

According to a new Packaged Facts report, “the sweet spot for accelerated growth and highly profitable sales” looks to be in eco-friendly products that target multiple consumer desires rather than a single stand alone functional benefit.

In 2009, retail sales of green cleaners reached $557 million, which only accounts for approximately 3% of the total household and laundry cleaner retail market. However, between 2005 and 2009, it is estimated that retail sales of green cleaners grew by 229%. This robust growth rate more than tripled the green cleaners’ share of the market for household cleaners, according to Packaged Facts.

“Emotional-, therapeutic- and sensory-influenced benefits such as family safety, health and wellness, aromatherapy, style and design, and environmental concerns have emerged as important drivers in the segment,” said Don Montuori, publisher of Packaged Facts. “As green marketers better connect their products to these aspects of consumer preference the market will continue to make a transition from niche to mainstream and ultimately approach $2 billion in sales by 2014 based on our expectations.”
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Transforming Trade Promotion

Trade promotion among consumer packaged goods companies is a $176 billion dollar business. Spending has risen more than 60% since 1997, and the percentage of manufacturers’ marketing budgets devoted to trade has reached an all-time high of 56%, according to a study just released from Kantar Retail, Wilton, CT.The study, “Transforming Trade Promotion/Shopper-Centric Approach,” illuminates the changing landscape of this important business and shows why trade is a top priority for leading manufacturers and retailers.

According to Kantar Retail, trade promotion has long been considered anecessary evil in the world of consumer packaged goods (CPG). Optimization has been the singular goal of trade practice in the 21st century, as CPG manufacturers have worked to make their spending as efficient as possible. Today, many industry leaders believe that optimized trade promotion is synonymous with successful trade promotion.

“Intense focus on trade promotion efficiency causes many to lose sight of the fact that trade programs are the single most important tool available to influence shopper behavior in pursuit of overall marketing objectives,” noted Todd Bortel, principal at Kantar Retail. “Leading manufacturers are those who truly understanding the role trade can play along the shoppers’ path to purchase and harness the power of trade promotion to influence shopper behavior to drive the business for the category and the brand.”

According to Kantar, trade partners that focus exclusively on optimization are destined to fall behind. Efficiency is a sine qua non of modern trade, but the real frontier lies with the shopper. Kantar contends that CPG companies must consider how they can reach shoppers along the path to purchase. Industry leaders will be able to influence shoppers as they choose the outlet, shop the store and ultimately select which products to buy. The new challenge in trade promotion will be learning how best to steer one’s organization along this shopper path, according to Kantar Retail.

As shopper-centric trade evolves, CPG companies will confront a host of new issues. Shoppers are reacting to economic conditions by making fewer trips and cutting costs. Traditional trade promotion has become less relevant as retailers focus increasingly on price.

To address these new challenges, Kantar Retail has provided specific recommendations, case studies and four strategic pillars that underpin “Path to Purchase” marketing.The study also ranks the top performers in the industry and highlights the factors that have helped them to excel. This year’s leading performers in trade promotion included Procter & Gamble, General Mills, Pepsico and Unilever, according to Kantar.
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Targeting Seniors? Their Spending Power Is on the Decline

They buy toothpaste and shampoo just like their younger counterparts, but other key living expenses may very well be affecting how much seniors are willing to spend. According to an annual survey of senior costs released by nonpartisan advocacy group The Senior Citizens League (TSCL), seniors have lost almost one-quarter of their buying power since 2000.

TSCL tracked 29 key items, ranging from housing to medical to food. Some sectors have experienced big increases between 2000 and 2010—homeowners insurance (108%), Medicare Part B monthly payments (143%) and eggs (93%), while personal care product expenses have risen just 6% and personal care service expenses jumped 31%, according to TSCL.

“This study makes clear what millions of seniors already know too well: for every $100 worth of expenses they could afford in 2000, they can afford just $76 today,” said Daniel O’Connell, chairman of TSCL. “What has long been a difficult situation for seniors is quickly becoming a dire one.”

According to TSCL, a majority of the 37 million Americans aged 65 and over who receive a Social Security check depend on it for at least 50% of their total income, and one in three beneficiaries rely on it for 90% or more of their total income.