Scary, Scary, Scary-- retail bankruptcies and brand dynamics

Retail analyst Howard Davidowitz leveled some frightening predictions today on Yahoo's tech ticker site: we are going to see hundreds of thousands of stores and thousands of malls close because the consumer and the consuming market that have accounted for 70% of our economy in the past have fundamentally changed. He cites the continuing tsunami of retail bankruptcies, closings, and liquidations as evidence of this shift.

A little research on my own revealed the following recent bankruptcies or closings: Bailey Banks & Biddle, Fortunoff, Whitehall Jewelers, Wickes Furniture, Z Gallerie, Lillian Vernon, Linens 'n Things, Goody's, Mervyn's, Boscov's, Mrs. Fields, Gottschalks, Ritz Camera, Drug Fair, Filene's Basement, Bachrach, Oililly, Eddie Bauer, Crabtree & Evelyn, Virgin Megastores. And I'm betting there are a great many more teetering on the edge.

Last night I attended a sharp panel discussion in San Francisco hosted by The Luxury Marketing Council on the disquieting topic: "Discount or Die?" Moderator Alf Nucifora of the Council kept a tight rein on four Bay Area panelists who debated the topic and kept returning again and again to the cautionary example of retailer Saks Fifth Avenue and its repetition of sales, discounts, and savings events.

Karla Martin of Booz & Co. made the point to the panel that Saks had indeed damaged its luxury brand status irreparably not just by discounting but by publicly flaunting its discounts and discount rates in ads, mailings, etc. She compared the sinking of Saks into discounting its new receipts in season against the recent Neiman Marcus email to its customers announcing 'silent sale' discounts on merchandise from the previous season-- one is brand death by discounting (Saks) and the other is simple clearance (Neiman).

When a brand loses its place in the market, when it disappoints its customer base and slips accidentally and inevitably toward a new shopper in order to stay alive, its options become fewer and fewer. (I personally watched Casual Corner and Petite Sophisticate become addicted to the crack cocaine of 50%-, 60%-, 70%-off pricing in order to incent dwindling store shoppers who in turn were attracted, ultimately, only to the percentages; both chains spiraled into liquidation.)

I have to wonder when Saks, which has been sold and repackaged multiple times in recent years, will join that list of bankrupts up above.

--Timothy Cohrs

www.TimothyCohrs.com

An Affordable Luxury in the Great Depression 2.0

Recession. Layoffs. Cutbacks. Downsizing. Banking crisis. Mortgage crisis. 401(k) crisis. Belt tightening. Bailout. Meltdown. Bankruptcy. Foreclosure. Debacle in Detroit.

There is definitely not a lot of good news out there as we edge into the one year anniversary of the financial crisis. Millions of us across the country are all over any personal expense that can be pared down or dispensed with. Most things discretionary have already been done in: Meals out-- forget about it. Fall's new clothes-- definitely not essential. New car--completely a thing of the past.

And yet... disaster and downgrading cry out for relief, or at

least some leavening.

As Frank Lloyd Wright put it so eloquently: "Give me the luxuries of life and I will willingly do without the necessities." While few of us can be as profligate as Wright in the face of repeated financial ruin, most of us crave a little luxury in our lives. And these days, that luxury better come with a pretty small price point.

Enter the Mrs. Meyer's Clean Day brand.

Delivering luxury in the most

mundane of product categories-- household cleaning supplies-- the Mrs. Meyer's brand provides a series of breakout products for those of us desperate for relief from the generic and the cheap. For a couple of bucks more than the name-brand-plain dishwashing liquids that come in ugly bottles filled with science fiction lab fluids emitting science fiction lab odors, you get this instead: Aromatherapeutic household cleaners scented with naturally occurring essential oils that are "refreshing, invigorating, and... pick-you-up." (per the label)

On top of all that, the product labels are wonderfully designed-- a combination of generic industrial and knowingly hip-- the products are biodegradable, are never tested on animals ("cruelty-free" again per the label), and just plain work well. Instead of covering your hands and cleaning your counters and wiping your plates with something that looks like the Klingons might have guzzled it in the last Star Trek movie, you have an experience that is refreshingly scented and retro cool and stays around the kitchen doing that over and over again for the next 6 weeks.

Perhaps Mrs. Meyer's products aren't quite at the level of Frank Lloyd Wright's obsession with grand pianos during personal ruin, but they are affordable luxuries. For two dollars more than Dawn or Palmolive or Joy or Dove you can feel as good about a necessity as you might about a luxury. Or as I believe one of the recent out-of-home ads for the Mrs. Meyer's brand puts it: "Work hard/smell nice/there are worse things in life."

--Timothy Cohrs

www.TimothyCohrs.com

Abercrombie & Fitch-- echoes of the Banana Republic safari store

A lot of retail writers, analysts, and commentators are taking a swing at Abercrombie & Fitch recently. And it isn't hard to understand why. (One of the most intelligent and entertaining commentaries is former Wall Street analyst Kristin Bentz's "talented blonde" blog, August 16th posting #3.)

The chain's July '09 comp store sales were a negative 28%, topped by June's astonishing 32% comp store decline, and matched again by May's negative 28%. Add those astounding negatives to a 23% drop in revenue in the second quarter plus April's negative 22% comp sales figure, March's negative 34%, February's negative 30%, and the fact that the chain hasn't posted a positive comp sales figure since April '08 (positive 6% ) and November '07 (positive 2%), and the financial picture is just not pretty.

Abercrombie's signature brand imagery has been much debated. Maligned as 'teen porn' and 'sexvertising,' the brand's male model

s cavort in an endless afternoon of sharp sunshine, even more sharply defined abs, and sharply beside-the-point young women. There is a blatant eroticizing of the teen male body and just as blatant a marginalizing of the female form (with or without clothing, they always look bored at being beside the point).

The stores themselves are also a signature experience: Basted in wall-to-wall music, at a volume level inexplicable and forbidding to customers over the age of 26, and darkened to an extreme matched only by the chain's Holister and Ruehl spinoffs.

Where to point the finger of blame for this well-branded failing brand? The recession...price points...merchandise...

Let's take a trip through retail history to a point in time just 20 years ago when another highly stylized and visually unique retail brand was experiencing a similar fall-off in consumer interest and sales.

Banana Republic-- in 1989 a store known for interiors awash in wild safari theme decor. Twelve foot tall stuffed giraffes, real size off-road jeeps, thatched roofs, elephant tusk door handles. And the merchandise itself was riddled with multi-pocketed vests and pants with

zippered legs for conversion to shorts and women's clothing reminiscent of Merrill Streep's wardrobe in the film "Out of Africa."

Banana Republic had begun its existence as a catalog offering vintage military surplus gear and apparel. It morphed into a catalog business with a small retail presence (Mill Valley

and San Francisco) until Gap, Inc. purchased the business and supersized it.

The catalog was filled with item copy written with a decidedly un-catalog-like tone and was studded with item entries written by literary and celebrity guest writers.

The camp stores, the wildly un-chain-store tone of the catalog, the romantic style of the garments offered for sale-- it was all just wonderful until the consumer stopped being interested. Then absolutely none of it mattered.

Banana Republic began a long, slow transformation from a novelty chain to the clothing resource for urban professionals that it is today. The question facing Abercrombie & Fitch is whether, or when, they will begin their own transformation from the highly unique point in the market they have achieved to one that will register with consumers in the future.

Retail is littered with chains and concepts that ran their course and failed to evolve further. Banana Republic is one of the few to have ever survived such a total identification with a merchandising fad. Abercrombie's fate remains to be seen.

--Timothy Cohrs

www.TimothyCohrs.com