What does this mean.  Well for the folks in Bentonville, AR I think it means having to think about smaller boxes.  Does the “Neighborhood Market” take a higher profile?  I think it has to, but not without significant change.  There needs to be more general merchandise and a pharmacy before this concept catches.  When they perfect the format then they can spread like wildfire across the US.  But with that spread means far more localization of buying.  MORE not LESS.  Far less centralization of power in B-ville will be required.  For the Wal-Mart big boxes (and lets not forget that is who they are), it will require even sharper pricing and greater customer service.  Pricing they have service they stink at.  Sam Walton would be appalled at the state of service at your local Wal-Mart, and rightfully so.  The best example is the Wal-Mart greeter.  It used to be a retiree that greeted you, said good morning and sent you on your adventure.  They were the brunt of many jokes, but it was a folksy and familiar experience at every Wal-Mart.  Now many times it’s an 18-year-old with tattoos and facial piercings that won’t even look you in the eye let alone say hello.  This must change for them to succeed.

For the other more local retailers in big, yet not huge boxes (CVS, Walgreen’s, Dollar General, and the Grocers) it will require customer service and selection in both food, pharmacy and general merchandise to woo customers.

The retail landscape has shifted and the ones that can move the fastest and key in on local demand will be the winners.

I believe CVS has the most sophisticated loyalty program in existence at retail, and the only one that is truly national in its scope.  But if you look at their performance, they trend behind Wal-Mart and Walgreens which have no such programs.

Is the consumer getting it’s money’s worth?  Is CVS?  I don’t think so.  I think there is tremendous effort being thrown against a program that costs too much and delivers marginal benefits to the targeted audience.  Redemption rates continue to lag and the program is largely under utilized.

So where is the benefit?  If the consumer’s not winning and the retailer isn’t either, what’s the point?

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.

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.

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/

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?

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.

“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/

“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.

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