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In this Revolution, the Consumer Wins

By Nancy Jeffries, Correspondent | July 1, 2010

Retailers review the enormous changes taking place in their industry at this Fragrance Group International event.

The retail environment is being revolutionized and the consumer is winning. That much was clear at Fashion Group International’s presentation of The Retail Revolution last month at New York’s Hilton Hotel. FGI President Margaret Hayes, introduced the program, noting that the featured presenters “were agents of change who determine how to address their customers as retail becomes increasingly all about the consumer.”

Moderator Robin Lewis, CEO of his own consulting practice, a former vice president at Goldman Sachs, and the co-author of a soon-to-be-published book on the transforming retail industry, welcomed panelists Michael Gould, chairman and CEO of the Bloomingdale’s division of Macy’s Group; Mindy Grossman, CEO of HSN, Inc., and Ben Fischman, president and CEO of Retail Convergence Inc. (RCI), the Boston-based company that operates, a leader in the digital private sale space.

From traditional bricks-and-mortar stores, to the internet, social networks, fashion and beauty clubs, and television, structures and business models are being transformed to respond to the all-powerful consumer. Based on this premise, Robin Lewis kicked off the discussion by positing five major value shifts in the retail landscape, saying, “The revolution is upon us and the consumers are winning. They are forcing us to follow specific rules of engagement that will allow us to engage with them. These consumers are not static, they are constantly on the move, and if consumers choose you, you’d better be able to give them a compelling experience, with a mobile location, both physically and electronically.”

The first major value shift, said Lewis, took place during the recession. That is, people want a fair value price, and they have gone from “needing stuff,” to demanding experiences.

“Essentially, it’s the difference between buying Maxwell House in a can and the whole Starbuck’s experience, or the interaction with a space like Rue La La,” he added, which sells everything form cosmetics and fashion, to picnic baskets.

Value Shift Two, is the move from conformity to customization, from mega brands like Gap to niche products in small batches, like 800 or 1000 blue jeans from niche brands, for example.
FGI’s Retail Revolution panel with, left to right, Michael Gould, Chairman and CEO, Bloomingdale’s Division of Macy’s Group; Robin Lewis, CEO, Robin Lewis Consulting; Mindy Grossman, CEO, HSN, Inc., and Ben Fischman, President and CEO, Retail Convergence Inc., the Boston-based company that operates, a digital private sale space.
Value Shift Three is from Plutocracy to Democracy, with such examples as Norma Kamali products at Walmart, and Nicole Miller at J.C.Penney.

Value Shift Four is a transition from New to New and Now, with more new lines, branded events, and brands that are knocking on your door.

Value Shift Five is the move from Self to Community, with ostentation giving way to understatement.

“Given these five rules of engagement, we predict that the future of the industry is going to be utilizing three imperative strategies,” insisted Lewis.

These strategies include Pre-emptive distribution platforms, which can be anything from bricks-and-mortar, with such venues as Bloomingdale’s on 59th Street, SoHo, and Dubai, as well as online stores, and more.

The second strategy is the importance of the “Aha” moment. When you do get in front of the consumer’s face you have to have the neurological connection, and the consumer should get that dopamine rush.

The third strategy is Value Chain Control, from accessing knowledge of the consumer’s dream, to enabling the consumer to attain that dream at every step of the value chain.

Lewis cited Ralph Lauren’s fight for control of his brand in every retail area possible, to keep the consistent message regardless of where the brand appears.

Business Models Today

Ben Fischman, president and CEO, Retail Convergence, Inc., which operates Rue La La, an exclusive, invitation-only online shopping destination that features premier brands within 48 hour private sales lifestyle boutiques, believes mobility and private sale shopping, with new applications for mobile devices including iPhone, iPad, and mobile web experiences for Blackberry are the newest retail destinations. Fischman said, “Rue La La delivers complete shopping mobility to our members, who can access their favorite brands when our boutiques open at 11 am, no matter where they are.”

The site offers everything from high-end spa services, including waxing, yoga, and skin-revitalizing electrical stimulation, to fashion brands, and jewelry, all at the touch of a button.

“The boutiques and 48-hour limited time events create excitement, new marketing opportunities, and a different shopping experience for consumers that is found at your desktop or mobile device,” said Fischman

The concept was launched pre-recession, but Fischman pointed out that innovation and engagement with consumers have resulted in the company’s success.

Mindy Grossman, who is a 32-year veteran of retail, and currently oversees a $3 billion retail portfolio at HSN, said, “Even though the ceiling came down we continued to have sales growth in 2007/08.” She notes however, that the environment has changed. “It’s no longer about customers coming to you. You have to have innovative concepts, products, and value, while merging content and community,” she says. Grossman added, “I don’t believe we are in any kind of a robust environment. There’s not a lot of optimism out there, so we have to be very innovative.”

Gould remarked, “It is not so much about how you did in the recession, but what did you learn from this and how will you be in the future.”

He cited the 138-year history of Bloomingdale’s and the expanded programs and training the store has today.

“We have unlimited opportunities here today, and we are a neighborhood store that looks at where we are going. We’ve changed our beauty environment with our beauty partners. Customers return to this area. You’ve got to come back to La Mer. You’ve got to see that fish tank. You’ve got to come to the MAC counter at Bloomingdale’s and see that chandelier,” he said. “This beauty environment has been recreated and today’s customer wants to shop in different environments,” he added.

Gould said that there has been a move from environments to experiences, and that the beauty floor at Bloomingdale’s is an example of this. “The cosmetic industry has this reputation. They are the best. When the cosmetics floor was redone it attested to that. As we continue to evolve we need to look at what’s unexpected. When we were doing the floor plans for Bloomingdale’s in Dubai we featured Magnolia Bakery on the main floor. That’s the unexpected,” said Gould.

Bold and Innovative Moves

According to Grossman, bod moves and risk-taking are necessary to own the relationship of direct to consumer. She noted that the right technology to reach the customer and the concept of content as power, are key.

“We at HSN have taken a bold move, and say we are about inspiring consumers with an editorial lifestyle platform, to be a significant force in the consumer and cultural landscape,” Grossman added. She advised, “Have incredible partners, celebrate small successes, and be evangelical in your enthusiasm. We believe products, personalities, and service are key; and if customers are happy, they become your evangelists.”

Fischman commented on creating excitement in retail.

“I believe that e-commerce continues to introduce the notion of surprise and delight, which are important parts of this culture. This, plus speed, I believe, are defining qualities of the success of Rue La La.”

He noted that because the featured products on Rue La La cannot be felt or touched, the site must bring an experiential quality to the retail experience.

“We believe great retail must be exciting. E-commerce became a search box journey, but we try to drive addiction. We bring our products to life with great photography and if you buy it, we will make any adjustments required. We will fix it. We call it make up sex, so if we screw up with our customers, we will make it better,” said Fischman.

Gould noted that his online business is running greater than 34%, but there are other things.

“Like how we drive our business in the future and what will we bring that is different for our best customers, who shop about 36 times per year.” Grossman concurred, saying it is important to understand the behavior of the customer. “We are constantly using feedback from our customers to inform our responses,” she said.

Fischman said, “I’ve never seen anything grow faster than mobile, not just information, but transactions. The opportunities are significant.”

Grossman agreed that mobile is the ultimate experience on the go. Robin Lewis cited an example of a customer who was walking past a North Face store and received a mobile message about a new North Face backpack that just became available at the store. “That is the kind of neurological connection we’re talking about,” said Lewis.

Gould said, “I’m a tenant farmer. It’s my store, but partners like Ralph Lauren or MAC are integral parts of it. I don’t want to be a store of leased shops. I want to have the Bloomingdale’s identity. Whether it’s MAC, Chanel, La Mer, everyone has their space, but it’s our store; and you know, like the Bloomingdale’s store in Dubai, that you’re in Bloomingdale’s.”

Grossman noted that brand differentiation is very important.

“For us it has to be about discovery. In the “Her” department, all the brands require a great product and a great storyteller. It’s a world we’re creating for our customers. There is so much out there that you really have to focus on curating and asking, ‘Why does a brand fit our model.’ I do think ubiquitousness is not necessarily a good thing. The product has to fit our brand,” said Grossman.

Gould said, “Bloomingdale’s is all about the people. We’re in the schmatte business and we have to satisfy customer needs. I believe David Ogilvy said it best, ‘Inventory went up in the morning and it went down at night.’ That is the reality,” said Gould.

According to Grossman, for the HSN customer, seeing is believing. She cited Fusion Beauty as an example.

“When we show the lip plumping and the consumer sees it happening, they go and they buy it right then. We want to be part of our partner’s brands and help them build their brand as well. When you’re both invested in the future that’s how you really become a partner.”

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