Niche Businesses Continue to Struggle

Where do you want to be right now?  A major brand or a brand servicing a well defined niche?  Major brands have the power to survive economic turmoil, while niche manufacturers are getting hammered by this soft economic climate.  More importantly they have spent years shunning major customers selling thier very well defined demographic only to find that those consumers are now tapped out.  Case in point…Yankee Candle.

First let it be said they make a great product.  But they have shunned traditional channels and grown through aquisition, direct retail, and the occasional major customer.  But what has happened to then more recently?  They have been forced to shutter one of their retail operations due to poor sales (Illuminations).  Their aquisitions are falling on hard times and are being forced to close (Aroma Naturals).  Finally they have seen business drop because their customer base is evaporating.

Was there a better path?  Yes, a broader customer base.  More focus on broad market appeal.  Less niche and more breadth.  Is it too late?  I think so, but it will be interesting to watch this brand retrench and try to evolve to a new space.

 

New Marketing Strategies Needed for New Consumerism

Avi Dan has an interesting take on new marketing in a new consumer age, over at AdAge.

http://adage.com/cmostrategy/article?article_id=136759

Marketers will be challenged, but I’m not seeing a recognition of the twin-fold threat of “new consumerism” and the rise of private label.  Mr. Dan asserts that if brands don’t re-think everything they do they will be left behind.  I agree, but I’d add that it is the secondary and tertiary brands that are most at risk.  Big brands like P&G, GE and Coke get this.  They will re-think and adapt to the “new” business as usual.  But Private Label will decimate the lesser brands.  Retailers will continue to invest in these brands and destroy the little guys that exist.

The smaller brands claim to be nimble.  They better be, and they better get a move on because there is a storm coming that is going to clear the plains.

 

Wal-Mart’s Great Value Brand

Christopher Durham over at My Private Brand Blog does a great write up on Wal-Mart’s revitalized “Great Value Brand”.

It sounds like they have made great strides from where they were but they still have some work to do.  It will be interesting to see how this brand evolves.

http://mypbrand.com/

 

And Now This On Consumer Spending

This in from CNBC:

http://www.cnbc.com/id/30602047

Consumer frugality may last well into the next decade, boding well for the value merchants and private label purveyors.

So if you are a mid-tier brand what is your strategy?  Do you have one, and if you don’t what is your liquidation strategy?

 

Shopping Behavior

Every branded company is asking how long will this last.  No they aren’t talking about just the recession, they are also talking about the trend they are seeing away from brands and toward Private Label.

We we get one of our first hints from a Retail Forward Survey found here:

http://www.retailforward.com/pressroom/pressreleases/051309.asp

Seems women’s buying patterns on clothing, shoes, and accessories may be changed in the long term.  Not a positive first sign.

 

Bankruptcy

This just in from “Retail Information News”…..

“Store closings have slowed down in 2009, but retail bankruptcies are on a torrid pace despite signs that indicate the recession is bottoming out. Filene’s Basement is the latest to declare chapter 11 bankruptcy on May 4, 2009. It joins a list of 15 other chain retailers that previously filed for bankruptcy in the 2009 calendar year. Notable retailers to declare bankruptcy this year include Bi-Lo, Bruno’s, Drug Fair, Ritz Camera and Fortunoff. Here is a comprehensive list of retailers who stumbled in these challenging times and sought court relief from creditors.”

Expect even more throughout the year, and many of these to falter as the come out of bankruptcy or to convert to a liquidation while in bankruptcy.  The game has changed and most of the players on this list aren’t needed in retail.

http://www.risnews.com/

 

Store Closings

This just in…..

“A new report from CoStar Group revealed that major U.S. retailers closed nearly 7,000 stores while opening approximately 5,700 new locations in 2008. The result is a net loss of more than 1,000 stores for the year, according to research compiled by CoStar Group’s news division. The net loss in store count, while not unexpected, follows several consecutive years of retail expansion and substantial net store growth.” http://www.chainstoreage.com/story.aspx?id=102465&menuid=443

Again while not unexpected, it is shocking how fast the turn around has occurred, and does not bode well for the near term future of commercial real estate.

 

Shopping Center Angst

The 2nd largest US shopping mall owner filed for Chapter 11 bankruptcy protection today.  General Growth Properties of Chicago has $29B in assets and $27B in liabilities.  Lenders refused to give the company more time to look for more refinancing options.  This is the largest real estate bankruptcy in US history and will not be the last I’m sure.

10% vacancies and rising will mean even more trouble as commercial real estate values tumble and shoppers stay home and count their pennies.

 

Private Label Perfect Storm

We’ve all seen “Perfect Storm”  a combination of three storms combine at one point and sink the ill fated Andrea Gail.  The ship sinks killing all on board.  My question is will the economic destruction turn out to be the perfect storm that wreaks havoc on brands and ultimately kills many that might have otherwise survived if they hadn’t found themselves in this time and place.

My premise is that the economy is tanking at the exact time that retailers are expanding their private label offerings and because the economy is tanking people are looking for money saving alternatives, which will push them toward private label.  In addition private label is pick ing their game.  The product is better and much closer to the brands in terms of quality, combined with brands downsizing both offerings and quality in an attempt to maximize profit.

I believe consumer buying patterns will be changed for the forseeable future.  Wal-Mart, Dollar General, Family Dollar, Aldi are all clear winners in this environment.  As consumers sample the private label offerings at these retailers and find them acceptable, will they ever return to the mega-brands?  Is it worth the effort for mega-brands to try and lure these consumers back, or should they just le them go?  All interesting questions that will be played out over the next several years.

I think this is a perfect storm that will send a number of brands to Davy Jones Locker.

More info to support my thoughts to be found here: http://www.retailforward.com/pressroom/pressreleases/041409.asp

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The Beat Goes On

It’s been a while since I have posted but I just fired off two micro blogs.  Too much time Tweeting I guess, used to tapping out 140 character thoughts.  My point is to touch on the continuing slide at retail.

Black and blue, so long Z Gallerie, continues a refrain at retail, that I fear will last well into this year and next.  Store Closings.  I read this today, vacancies at US malls and shopping centers reached a 10 year high.  Vacancies are predicted to rise and rents paid are predicted to continue to fall thru 2010.

Are malls relevant any longer?  I can’t remember the last time I bought anything at one.  I shop, and I leave, usually asking why am I here?

Addendum:  This just in: “New figures from New York-based real estate research firm Reis show that strip malls, neighborhood centers and regional malls are losing stores at the fastest pace in at least a decade.

In the first quarter of 2009, retail tenants at those centers vacated 8.7 million square feet nationwide, according to the latest report from Reis. That quarterly total exceeds the 8.6 million square feet vacated in all of 2008.

Reis’ report shows U.S. mall vacancy rates rose 9.5 percent during the first quarter, outpacing 2008 (8.9 percent) and marking the largest single-quarter jump since Reis began publishing figures in 1999.

Mall operators and landlords responded by reducing rents by an average of 1.8 percent in the first quarter — the biggest quarterly drop in rents since 1999.”

http://www.bizjournals.com/phoenix/stories/2009/04/06/daily80.html?surround=lfn

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