“We indeed are in uncharted economic territory both domestically and globally,” said Lewis, who set the stage for the presentation, and thanked Kurt Salmon Associates for its consumer Survey Results, as well as sponsors, MasterCard Advisors, Cotton Inc., Unique Solutions, and Chic.TV, FGI Social Media and Video sponsor.
Pictured (l-r): Robin Lewis, CEO and managing editor, The Robin Report; Joseph Gromek, CEO, Warnaco Group, Inc.; Alexis Maybank, CMO and founder, The Gilt Groupe; John Long, partner & retail strategist, Kurt Salmon Associates; and Neil Cole, CEO, Iconix Brand Group, Inc.
“We probably won’t see a further drop in housing prices, but it will take time to bring the housing market out of the doldrums,” he said. Tilton noted some signs of recovery, however, citing housing and vehicle production as the two most cyclical sectors. “We’re only producing about 1/2 million homes each year, half as many as we need, but supply will be used up. It’s anticipated building will need to come back to accommodate population growth,” he said.
“In a number of years there will be enough recovery for household debts to be paid off, however, we’ll need to see several years of intense saving,” said Tilton.
In sum, he forecast a low growth rate and low interest rate recovery, which means that the unemployment rate will likely stay high.
“Inflation will not be a big problem, but the bigger issue will be demand and the Federal government will need to keep interest rates low. The main risk from Europe is that we’ll see a repeat of what we saw in 2008, if banks start pulling back in what they’re willing to offer,” said Tilton.
“Customers are accepting higher prices and there is a key trend toward mobile commerce and Facebook commerce, with the consumer mindset allowing for spending up in the area of electronic technology,” he said.
While he noted that personal disposable income appears to have returned to pre-recession levels, for holiday, consumers indicate that they intend to spend less this year.
The Prosper Corporation study, upon which Long based his analysis, was compiled from the responses of 8,000 participants, utilizing eight years of data, with the most recent polling taking place on September 5, 2011. It revealed that while consumers say they want to spend less, they are actually spending more. In addition, according to the study, while income and spending have surpassed pre-recession levels, consumer confidence continues to lag.
Focus will be on the core customers and trying to tease out how they will spend. They are also trying to deepen the customer experience, integrate experience across channels, and avoid enticing customers to trade down.
“They’re going to provide some incremental revenue for you,” said Long, who also noted that the customer that shops multi-channel will be spending up to five times more than single channel shoppers. In addition, retailers will find growth internationally, in China and India, for example, and increasingly search for white space and innovation.
”The key question will be," asked Long, “Are you equipped to help your customers buy? That is a significant trend going forward.”
Robin Lewis then introduced the panelists, Joe Gromek, Warnaco, a $2.3 billion apparel company; Alexis Maybank, CMO, Gilt Groupe, with an e-commerce shopping experience format which features categories from women’s brands to lifestyle, including home décor and luxury travel; and Neil Cole, Iconix founder, an innovator in the licensing and brand management industry. Each provided their strategies for adding value for their customers in an era of change.
Moderator Lewis, who noted in his Robin Report, that the concept of retailers and stores selling stuff is a dead business model, kept the conversation relevant with his rebuttal of conventional thinking in the area of retail.
“If you keep thinking of yourself as a retailer, and your place of business as a store or website, and your offerings for sale as products, and your pricing competitively valued, then you will most certainly die.”
Further, Lewis added, if you define yourself solely as a seller of goods to end users, you are adhering to an antiquated concept.
“So, are you in the retail business, or, are you in the consumer satisfaction business? And, if so, what is it that you can uniquely satisfy them with?,” asked Lewis.
“They’re buying things they absolutely need. The middle market has some discretionary space, and the affluent consumer is getting clobbered in the market. So, no one feels good about shopping,” said Gromek.
“We’re focusing on a phenomenal brand, with a phenomenal marketing effort,” said Gromek.
Alexis Maybank, Gilt Groupe, said that the majority of her customers were in their 20s and 30s.
“For this group, conspicuous consumption is no longer in vogue. This is not disposable fashion. Civic responsibility is at the forefront, so brands, and what they stand for are important to the younger consumer. We do sell high quality at better value from brands that stand for something and we try to incorporate those values into the brands we sell,” said Maybank.
“It’s a new world. Growth is coming from China, Brazil and India. It’s going to come down to people with good products and good brands,” he said. Iconix is about specialization, noted Cole, saying, “We’ve got great partners and we’ve been very lucky.”
Maybank emphasized a key element about Gilt Groupe, saying, “With Gilt Groupe, we have a business with less overhead, less people to sell, and we’re able to pass cost-savings on to the customer.”
She said that Gil Group's business model calls for changing product inventory rapidly, three times a week, and refreshing what they are showing with flexibility for consumers.
Lewis said, “White space, newness, innovation, and figuring out what’s next are key.” Cole reiterated that consumers respond to great, exciting brands. “Giving the consumer great stuff is important. There are new ideas and new ways to buy,” he said.
Maybank acknowledged the importance of controlling inventories, saying, “Our pricing tends to trend to what we see at retail, so the key difference is we can sell at pricing considered insider pricing, but given the cycles of retailing, we’ll move our inventory with flexible and adjusted pricing as it is reactive from a pricing standpoint.” She explained that Gilt Groupe’s customer response is being measured by how easy it is for them to shop. “Is the source helping me to understand how to wear something? This is key and has driven expansion for us,” she said.
Excitement behind purchase has a direct impact on a consumer’s willingness to purchase. Cole concurred, adding, “If you look at most stores today, 80% of the profits are unique to new, exciting brands with good value, that connect to the consumer.”
“It’s an opportunity, like a new eco-system for retailers. People need to look at their websites as their new flagship. Social media enables the online conversation. It means you’re there, responding to the questions quickly, and it also helps humanize your brand,” she said.
Gromek agreed, “If you want to keep your brand relevant, it’s something you must do.”
“Every retailer wants something to differentiate their stores,” said Gromek.
The panel also took questions from the audience, addressing such concerns as how to reach customers with a compelling business. The three most important things, according to Gromek, were brands, products, and innovation, citing Apple as a provocative example. Cole said to create value in your products, and Maybank said to inspire the consumer with fresh and new products, with a fast changeover.
“With 75% of our inventory selling in the first 90 minutes of its announcement on Gilt Groupe, presentation and flexibility are important parts of our model. Fast fashion is here to stay, but it means from a business standpoint that you have to shorten your time lines, adjust your offerings and inventory quickly, and create capsule collections for customers.”
Responses were mixed when asked whether Amazon's sales will surpass those of brick-and-mortar store selling. Additional information about FGI’s programs may be found at: www.fgi.org.