Carol Spieckerman's Brain On ... Ralph Lauren's Relevance

In her latest contribution as a Retail Wire panelist, Carol lauds Ralph Lauren for keeping it real and relevant.

Read the full discussion

Here's what she had to say ... Ralph Lauren is the quintessential global lifestyle brand(s) and it has enjoyed an enviable run of success through retail's roughest waters. The company has done a fantastic job of mixing tradition with modernity (although I still see Burberry as setting the standard in that regard), and its carefully-curated brand portfolio addresses multiple generations and demographics without (too much) cannibalization. You won't find digital touch screens and DJs at the flagship Rhinelander mansion re-do on Madison Avenue, for example, yet you can design your own Rugby shirt on the brand's website. The next generation (David) is ensuring that the brand portfolio stays head of the digital times.

The only major misstep seems to have been the company's creation of its Global Brand Concepts division a few years ago which promised to leverage RL's extensive design, production and marketing capabilities to create Lauren-esque brands for retailers. When GBC launched its first (and to-date only) lifestyle brand with J.C. Penney (American Living), it seemed to be Penney's big brand move but alas, many more came after (including its mega-deal with Liz Claiborne), diluting the brand's impact. American Living also fell victim to Penney's on sale-out-of-the-starting-gate antics which killed the value proposition from the get-go (too bad they didn't get in post-Ron Johnson, but I digress). Ralph may not have one upped Li & Fung on that one but the rest of his record speaks for itself.

I see many good years to come.

Planning your 2012 sales, marketing or licensing event? Want to schedule a meeting with Carol to discuss your 2012 retail and brand strategy? Carol is currently scheduling meetings in the following cities:

New York area

Denver, CO

Atlanta, GA

Charlotte area, NC

Las Vegas, NV

Berlin, Germany

Contact Carol directly at carol@newmarketbuilders.com for details.

To Be or Not to Be, That Used to Be the Question.

Back in the late eighties, I signed up for what seemed to be a terrific promotion and relocated to the West Coast. My new role had me managing multi-million-dollar businesses with what were considered the country’s premier department stores at the time. Remember Buffum’s, Emporium Capwell, Robinson’s, and Liberty House? The massive consolidation that soon followed my move might explain any memory lapses. All vanished without a trace through complete liquidation or acquisition. None of the banners were seen as having intrinsic value and, at the time, any private brands in their stables were private labels in the literal sense – they were interchangeable. Real brand equity came from national and licensed brands.

Back then, a retailer or brand was either in business, soldiering on under the same general business model, or it wasn’t. A lot has changed over the past decade.

Companies now have the potential to live on (and on) through deconstruction. The “parts” (intellectual property in the form of brands or technology, real estate holdings) are becoming more significant than the whole (the banner as it has traditionally operated). This past week offered a couple of field days for the media’s Monday morning quarterbacks as Kodak’s bankruptcy announcement and heated speculation that Sears will go private hit. Pundits wasted no time hyping their hindsight -- Kodak missed the boat on digital, Sears (a retailer!) has forgotten about its stores, yada, yada, yada. Leaving aside the fact that there are valid counter-arguments against both opinions, something far more interesting is at work.

Double Lives

Over the past several years, Kodak has dutifully launched marketing campaigns and incrementally-improved products, even as it lived a double life as a highly litigious patent troll. Seemingly undistracted by its imminent bankruptcy announcement, as recently as last week the company filed a patent infringement suit against Samsung over various image distribution capabilities and the week prior, similar suits were launched against HTC, Apple, and Fujifilm.

Kodak has long relied on its intellectual property as a source of cash. Although its licensing revenue has dwindled from the $3 billion it achieved between 2003 and 2010 to only $98 million last year, with its IP portfolio recently valued at as much as $2.6 billion and its 11,000 patents valued at $1 billion, it’s easy to understand the company’s ongoing vigilance.

Part and Parcel

The upshot is that Kodak’s future may see it selling off its camera unit and perhaps some of its patents in order to generate revenue that could be invested, not necessarily in its manufacturing capabilities or getting its products placed on shelves, but in further patent litigation and licensing development. Another scenario might have Kodak selling off its intellectual property piece by piece, over a period of years. It may not look anything like the Kodak of the past, but will that make it less relevant or just different?

Hedge fund manager Eddie Lampert bought 53% of Kmart while it was in bankruptcy and, in 2004, helped engineer Kmart’s purchase of Sears. The merger was completed the following year.Since that time, Mr. Lampert has embarked on a series of quite un-merchant-like but influential initiatives, including the 2009 launch of an online marketplace that would open up its platform to third-party sellers. Walmart’s far more limited marketplace launch happened more or less simultaneously and since that time, many more have joined the party.

Asphalt Assets

His asset monetization moves would seem to be predictable, given Mr. Lampert’s background, but the manifestations have nonetheless surprised many. Through its real estate arm’s website, Sears has listed nearly 4,000 of its Kmart and namesake stores that have space available for other merchants or retailers to lease. Retailers as disparate as Forever 21, Whole Foods, Gonzales Grocery Store, and Western Athletic Clubs Inc. have signed on for space and, leaving no asphalt asset unturned, the company is even offering parking lot space to auto repair shops.

But perhaps no maneuver has made more waves than Sears’ ongoing decisions to distribute, or license, its high-equity private brands to wholesalers and other retailers. Back in 2007, Sears created a $1.8 billion entity to house its top three brands, DieHard, Craftsman, and Kenmore, which at the time was heralded as the biggest “securitization” of intellectual property in history, although few took much notice of the long-term implications. It grabbed my attention because to me, it portended Sears taking its brands into new venues (something that Sears has since referred to as “externalizing” its brands). Since that time, Sears has inked highly-publicized deals with Ace Hardware and Costco for Craftsman tools and with Meijer for DieHard batteries (wholesale deals have also been struck for the Craftsman brand).

IP in Perpetuity

Considering that even middling brands can spawn hundreds of fine-sliced brand licensing agreements, as well as hundreds more when category extensions are explored, Sears’ current deals should be seen as the tip of the brand asset monetization iceberg. Should Mr. Lampert take Sears private, he will be able to pursue any number of far-flung brand ventures and property parcel-offs without worrying about Wall Street’s scrutiny.This could go on for quite some time, regardless of the physical condition of its stores.

In the meantime, other retailers such as Office Max have jumped on the brand externalizing bandwagon (and, take it from me, many others are actively discussing the possibility).

A recent article about Sears’ current situation ended by speculating that the company may cease to be a retailer within five years. To be or not to be?

Planning your 2012 direct-to-retail strategy? Pulling together your 2012 sales, marketing or licensing summit? Contact Carol directly to discuss how she can bring these and other insights to your teams.

Carol Spieckerman Talks Private Branding, Digital Marketing and More with Iconix COO, Yehuda Shmidman

In September, I had the pleasure of sharing the podium with Yehuda Shmidman, Chief Operating Officer of Iconix Brand Group, at LIMA’s inaugural Retail and Branding Conference in New York. Iconix is the second largest licensor in the world and, in the aggregate, the company generates over $12 billion in annual retail sales by managing and marketing a diverse portfolio of more than 25 consumer brands including PEANUTS/Snoopy, London Fog, Royal Velvet, Mossimo, and Joe Boxer. Mr. Shmidman also heads up global business development for Iconix and this year he was included in the “40 Under 40” list by Crain’s New York.

In this second of two parts, Shmidman discusses the role of private branding, digital and event marketing, and how Iconix is breathing new life into its more mature Iconic brands.

Read Part I

Spieckerman: One of the licensing community’s big concerns is direct-to-retail or DTR deals. Of course, you guys have set the standard there, but the other big concern is private branding. Do you see private brands as a threat to your model or as a complement? And where in general do you see the brand mix going forward?

Shmidman: A big part of our model is trying to displace private labels. When you have private label brands that retailers create, oftentimes they offer a great product, and definitely at the right price, but when they stick a name on it that has no meaning, it’s really not a private brand, it’s just a private label. So in many cases, our positioning is to use our brands to replace that. For us, it’s about marrying our great brands with retailers who have great execution. In a way, when retailers use our brands to the fullest, we are their private brand and they get the best of both worlds: exclusivity, control through their sourcing, and at the same time, the value of the brand. In that way, I see private brands and our model as complementary concepts.

Read the rest of the interview

Walmart Resonates Part III: Brands in Command

Special notices: We will be in the greater New York area this week conducting retail trajectory presentations and client strategy sessions. Contact Carol Spieckerman directly to request a meeting.

Don't miss Carol Spieckerman's webinar, Cover Your Assets! The Retail Touch Point Transformation, tomorrow, Wednesday, 11/16/11.  Register online at LIMA's website now.

Last week, I shared my first and second takes on Duncan Mac Naughton’s presentation as part of the Bentonville Bella Vista Chamber’s WalStreet speaker series. Today, I wrap it up with Part III.

Read Part I: Productivity and Plentitude

Read Part II: All Hail Scale!

Separation Anxiety

Back in May, Michael Moore talked about Walmart’s reintroduction of entire categories, rather than just products. Mac Naughton called these “heritage” categories (we call them “the three Fs,” meaning firearms, fishing, and fabric) and he added a somewhat surprising twist to the story. As important as EDLP and OPP (opening price points) are to Walmart, widening the price separation between good, better, and best punctuates their value on the price continuum.

Context is everything, so as Walmart completes its last-phase replenishment of many good-tier OPP items that were cut during Project Impact, it is simultaneously layering on a higher ceiling of best offerings, particularly in its heritage categories. The chorus of Walmart naysayers might call this a risky scheme, but a quick reality check proves otherwise. Strapped consumers don’t always favor a steady stream of cheap, throw-away items and in fact they often prefer to make select investments in high-quality, durable goods that will withstand some wear and tear.

Walmart is currently driving double digit comps in the hunting category by offering items such as $900 shotguns and, in fishing, by raising the fishing rod price threshold from $45 to $100. The company is really just participating in the high-low dynamic that is currently driving all of retail: with dollar stores gaining wider acceptance among higher-income shoppers, retail’s bottom has been lowered, making the entry-level market more saturated and competitive. At the same time, the luxury market continues to buck economic trends as the “haves” keep having. It’s for this reason that retailers such as J.C. Penney who are fighting their deeper descent into the murky middle are bringing in higher-priced items (such as $80 Liz Claiborne handbags). One person’s handbag is another’s hunting rifle; “luxury” is in the eye of the shopper.

Private What?

Walmart’s 2009 revamp of its mega-private brand, Great Value, ranks right up there with Project Impact in terms of industry buzz, and many have taken it as a sign that Walmart was going to embark on a private brand-a-palooza across multiple categories. While those dire predictions never really came to bear, the one-two punch of Great Value’s power proliferation in consumables and Project Impact’s curtailment of national brands created a palpable perception imbalance, if nothing else.

Mac Naughton didn’t hedge one bit on the branding front – national brands are what drives the authority that girds each category and, in apparel, Walmart now sees national brands such as Levi’s Signature as critical to quality perception as well. Walmart’s recent announcement that it will return to the basics that it arguably never abandoned and shutter its New York apparel office had many speculating about the brand implications (establishment of the office in 2009 was another move that had many predicting a private brand takeover). My head obviously wasn’t the only one that snapped around when Mac Naughton went all “national brand” on the audience, as a clarifying question regarding the role of private brands in Walmart’s overall strategy was raised during the Q&A. He didn’t hesitate to put a finer point on the situation, calling Walmart a “house of brands for less,” and stated that private brands would be deployed only when a price that customers need is not available. Suppliers, start your branded, OPP engines!

Mac Naughton also provided additional color by saying that, when Walmart stopped building stores, 9,000 dollar stores “showed up.” The horse they rode in on was “a bunch of entry level price point products” that Walmart couldn’t meet with their brand portfolio at the time. Walmart’s first choice is now a national brand, but if a suitable one can’t be had, they’ll push a private brand forward. In Mac Naughton’s words, “it’s all about price.”

Although Walmart’s appetite for licensed products is well-known in the licensing community, one doesn’t often hear Walmart execs call out licensing as a focus area. Mac Naughton did when he referred to a successful OPP backpack program that featured a licensed Hello Kitty version. I took that to mean that licensed brand providers will find new opportunities in the future, if they can bring on the value.

Scattergories

Mac Naughton blazed through Walmart’s point of view on additional categories. In home, the focus will be on sheets, towels, candles, floor care, and outdoor living. What’s left, you ask? The tchotchkes and pieces that once took up room but didn’t have a point of view. They’re outta there.

The focus in Walmart’s back-of-store entertainment area will be on “value and immediacy,” since the innovation hasn’t really been there lately. 3D didn’t deliver as expected, so Walmart is determined to win in OPP here just as they are in other categories. Walmart rakes in $300 million a year, with its $5 movie bin and its $5 CD business up 13 percent. Mac Naughton threw in a bit of imagery to make the point, saying that Walmart’s core customers are doing “head dives” into those bins (ouch!). Walmart’s overall share of new movie releases is an impressive 40 percent and they had a 45 percent share of the Transformers 3 release. The trick is to drive a bit of aisle crossing when that peak-time traffic hits the store.

If the shelf hogs aren’t flying off the shelves, doubling up on the high-turn, high-profit items that attach to them makes a lot of sense, particularly on the heels of Toys 'R' Us' announcement of its expanded and re-designed CE departments which will feature tablets, headphones, media players and Apple accessories. Walmart is focusing on all manner of iPad, iPod, television, and printer add-ons and increasingly relying on Walmart.com and its in-store delivery mechanisms to execute bulkier pieces, particularly in smaller stores that can’t dedicate the space.

It’s Beginning to Look a Lot Like…

Walmart began working on holiday 2011 at noon on December 25^th, 2010, according to Mac Naughton. A cross-functional team has been chiseling away since then on defining Walmart’s holiday point of view and plotting its product flow, daily sales, and service plans. Layaway kicked off in mid-October (earlier for associates) and Walmart’s Christmas price guarantee will ensure that they aren’t beat on price, even after the sale. Walmart’s previous announcement of its ad match program doesn’t run counter to the EDLP philosophy according to Mac Naughton. It just takes care of the anomalies.

Walmart has also taken a stand on which items will drive its holiday must-haves. Mac Naughton shared the top five, which are Elmo Rocks, Leap Pad, Fidget, Call of Duty, and the IPad II.

Mac Naughton closed his presentation by saying that he is as “serious as a heart attack” about growing the business. With Walmart  just reporting positive comps for third quarter and its first revenue gain in two years after nine quarters of negative same-store sales, hopefully he will be able to breathe easy come 2012.