My reading this morning has been dominated by retail. First up, an article on Forbes.com by Kenneth Rapoza in which he quotes an article in China Daily reporting that Bernard Arnault plans to "adjust" the Chinese expansion plans of LVMH. The article suggests that the rapid expansion into second and third tier Chinese cities may cease because people prefer travelling to the larger cities to shop. I think this is 50% accurate. I suspect another driving reason is the need to reduce risk of economic turndown and brand rejection through saturation. Just as many other luxury brands follow where LVMH stores go (arguing over mall adjacencies) they would be wise to follow LVMH where they so not go !
Just as the Chinese government continues to manage a gentle landing and a more sustainable growth pattern Luxury brands need to do the same. For some, it will be too late.
But focusing back on the concept of "destination flagship stores", pulling consumers into large cities to have a differentiated retail experience - this is as true now as it was for the last 100 years. That once or twice yearly pilgrimage to "the capital city" to seek goods not available elsewhere. eCommerce naturally allows a brand to hedge it's bets, comprehensive availability of purchase with the perfect retail experience focused on a lesser number of stores.
Which takes me neatly to the second article. An excellent summary in today's FT by Barney Jopson on the whole Ron Johnson / JC Penney debacle. It's worth spending some time reading this and other reports (all this week) about the hubristic like qualities of Mr Johnson who was the very successful head of retail at Apple before heading over to JC Penney as CEO to 'repeat the magic' (my words).
Except the magic was perhaps not so much to do with Mr Johnson and more to do with Apple's products or, as the article quotes Ken Favaro (an analyst at Booz & Co) "What made the difference for Apple Stores was the power of products. It wasn't retailing expertise."
And that's what JC Penny and Mr Johnson found out. On one hand an innovative tech / lifestyle brand and the other a 112 year old department store chain.
What's so surprising is why anyone is surprised !
So as I drink my third espresso what are the conclusions and the killer question ?
- a brand is only as strong as the product
- don't overextend the retail footprint just to grow sales - make existing stores work harder
- people come to buy products not have a retail experience (that's still important but fundamentally it HAS to have a great product at the centre)
- when you are hiring are you hiring a person or the successful brand they last worked on ?