The recent brouhaha about bloggers participating in programs asking them to go to a store with a gift card in hand, check things out, and then write about it afterwards got me thinking. These stores (Kmart, and Sears) are not the typical hip hangouts of the social media crowd. For one thing, many of the young, hip crowd live in urban areas where Kmart and Sears are not as easily accessible. Those stores that are “in town” are not, at least around here, in the nicest locations. So whether you agree or disagree with the Izea promotion, my question is this- what other ways do you think are available to re-invigorate “tired” brands? How would you imagine attracting a whole new breed of customer who has either a) long ago forsworn your place and just forgotten it as someplace to consider on their list of places to go to shop, or b) considers your brand something beneath them, or not worthwhile of consideration?
Let’s look at other verticals that have tried Brand Rehabilitation recently. Let’s start with restaurants.
In the restaurant business, the restaurant lifecycle tends to be about three to five years. (And I should confess here that my Father-in-law works for a major food distributorship company who supplies restaurants, so some of this information comes from him). When you’re new in town, you attract a lot of business, and maybe even develop a loyal following. But then after a time, a new kid comes on the block and starts to, literally, eat your lunch (crowd). Classic restaurant brands from the late 80′s and 90′s, like Outback, TGI Friday’s and even Chili’s now have to compete for the same dollars with Bertucci’s, Carraba’s, Macaroni Grill, PF Chang’s, Cracker Barrel, Applebee’s, and others, as well as local chains and small restaurants. Most restaurants work on a 30-35% margin, where gift shops, by contrast, have less merchandise loss and mark up most goods at least 100% over wholesale. This does not even take into account that a restaurant is a pretty dangerous place regarding worker’s compensation and insurance. Having helped manage the finances for two coffee shops at a local hospital, I know that there’s always problems with slip and fall, burns, cuts from those huge boxes of plastic wrap, broken dishes, equipment management- you name it. It’s a nightmare in some ways. Yet, 30-35% can still look like a pretty good profit margin, until your customer base starts to fall off.
Rehab of Old Favorites
Older restaurant brands like TGI Friday’s have done special menus recently in combination with shows on the Food Network, and done promotions with Top Chef. They also have some heavy duty deal with Jack Daniels and their barbeque sauce, incorporating other brands into their menu. (The new recipes at TGI Friday’s off the Food Network have actually been pretty great- it got our family back into the restaurant.) Applebee’s has also tried to find a new niche with healthier items on the menu, and by partnering with celebrity chefs like Tyler Florence. Former big restaurant brands like Bennigan’s have fallen on hard times and gone through bankruptcy, although it has recently emerged from Chapter 11 and is ready to take on new franchisees (good luck there in this economy.) I think the Brand Rehab for restaurants has been at best moderately successful. When we do go to Chili’s, for example, there’s not much of a crowd, and those who are there are more subdued than at a place like Carraba’s or PF Chang’s. I think the older brands are trying to attract new people as well as former customers using innovative marketing and by partnering with television shows- a bit like social media or reaching out to a diferent audience in a new way, I guess- but they have to overcome a lot of neutral to negative feelings to make headway. not an easy task at all.
Retail’s Uphill Climb
I think these experiments in brand rehab in the restaurant world should give us something to think about as we think about brand rehab in other markets, including retail. Let’s look at the big department stores, for example. Across the country, small to medium size retail stores have gone out of business or have simply been swallowed up by larger corporations, like Federated Department Stores, now known simply as Macy’s, Inc. Macy’s has replaced the family-run department stores of legend all over the country, from Filene’s in Boston, to Wanamaker’s and Strawbridge and Clothier in Philadelphia, to Kauffman’s in Pittsburgh, to Sibley’s in upstate, NY; Marshall Fields in Chicago, Abraham & Strauss, Bloomingdale’s, Burdine’s in Miami, Rich’s from Atlanta; Foley’s from Houston, Lord & Taylor and more. All these old, venerated brands have simply become Macy’s- the fast food franchise of middle of the road retail. Without even going into the loss of the large department store as a cornerstone of downtown commerce and shopping (a former department store may actually become a casino/slot parlor in Philadelphia), let’s examine what’s happened to the Middle Retail Sector for a bit.
Shopping at the newer department stores tends to be much more unpleasant than I used to remember it. Part of it is that the profit margins on retail depends on the goods you have on the floor; and per foot rental in malls is incredibly expensive. The floors tend to get overcrowded with racks and merchandise, making getting to the merchandise a hassle. Macy’s was actually sued under the American’s with Disabilities Act for not making their store accessible to people in wheelchairs and with other disabilities, largely due to the placement of their displays. This means that in general, commercial retail stores are under tremendous pressure to increase sales, have adequate merchandise, yet meet stringent requirements in all areas of the law, let alone worry about marketing and attracting an audience. The burdens just in terms of rent are large. But as we moved the big department stores into the position of being an Anchor store in a mall, we all sowed the seeds of their ultimate distruction.
Most malls are made up of small, single vertical retail shops- the Apple Store, Victoria’s Secret, Ambercrombie & Fitch, even Pottery Barn. These stores specialize in merchandise you might also find in the department store, so how does Macy’s compete with the Coach handbag shop, or have it’s women’s lingerie in competition with the mystique of Victoria’s Secret or their run of the mill housewares with Pottery Barn and Williams Sonoma? I would ay that the consolidation we’ve seen in Department store brands is directly related to the single vertical retailers that surrond them in the mall. We used to go to the mall to go to the anchor store- now we go to go to the competition just down the hallway.
What’s going to happen?
I think what’s happening is that we’re witnessing a hollowing out of the middle class and its retail establishment at the same time. We are either looking at high-end, single vertical boutiques like Victoria’s Secret, or lower end- get it all here shops like Target, Kohl’s, Sears, and even Marshall’s and TJ Maxx- all stealing market share away from the former big brands of the past. Ultimately, the big brands have to consider how to rehab themselves like TGI Friday’s has- or even Target, with attracting brand name designers like Isaac Mizrahi and Martha Stewart putting mid-range “classic” items into the stores. They have to re-reach a market that is no longer looking for the middle road, but are finding niche stores that meet a single need rather than looking for the efficiency of one-stop shopping from perfume to linens to lingerie to luggage to kid’s stuff. (And we’re not even discussing internet retail here, further carving out market share from the big boys).
Whether or not department stores survive, or eventually are given over to lower-end versions and high end niche vertical retail still remains to be seen. But I think Kmart and Sears recent attempts to reach out to new audiences is innovative and a great way to get people to reconsider an older, perhaps out of date and tired brand, especially when the old classics have all ended up in the bin, rebranded simply as Macy’s. As the economy begins to split the middle class into haves and have nots at an ever-increasing pace in the early part of this next year, the fate of the Department store may also hang in the balance, even as they seek to hang on and attract new customers who have long ago discarded their brand as relevant.