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    Published on: December 20, 2017

    by Kate McMahon

    Michael Preysman, the co-founder and CEO of the online contemporary clothier Everlane, laughs good-naturedly when reminded of his 2012 pledge: "We are going to shut the company down before we go to physical retail.”

    That was then.

    Everlane opened its first permanent brick-and-mortar store this month in Manhattan, with shoppers lined up around the block all weekend to check out the clothing and accessories in person.

    Despite the dire predictions of nearly 7,000 retail stores shuttering this year, Everlane joins the expanding roster of on-line companies launching their own evolving brand of physical stores. And we don’t mean Amazon adding more bookstores or selling the Echo and Dot in its recently acquired Whole Foods locations.

    Boll and Branch, a successful high-end bedding startup, opened its first store in an upscale New Jersey mall in August so consumers can touch and feel the product. Away, which sells sleekly-designed travel luggage, now has “concept stores” in Los Angeles, San Francisco, Austin and New York. Stylish eyewear purveyor Warby Parker started as online-only and now has 36 stores with plans for 25 more. Apparel sellers Bonobos (now owned by Walmart!) and Athleta have followed suit.

    Six years ago, the then 25-year-old Preysman was convinced that e-commerce was the only way to market Everlane’s line of “modern basics” for women and men. “What we found is, customers like to touch things before they buy them. You know, especially products when it's cashmere, when it's nice quality," he told the CBS Morning News. His observation mirrored a recent study which found that the majority of American consumers want that tactile experience that in-store shopping provides.

    Equally important, Preysman said, a physical footprint in New York and soon San Francisco advances Everlane’s “mission” to create stylish, ethically-made goods with “radical transparency on pricing.”

    My curiosity piqued, I visited the Everlane store in the city’s SoHo neighborhood yesterday (pictured below). The mural upon entering read:

    “Welcome to our first store. It took two years of testing. 108 smart people. 42 gallons of white paint.* $155,000 of glass. And at least $25,000 in mistakes.” (*Chantilly Lace, to be precise.)

    The $100 cashmere sweaters were neatly stacked in front, and the store featured informational brochures about the its production factories in Peru, Italy, Vietnam and China. The labels direct consumers to learn more on the website, including a breakdown of the pricing structure.

    While most items were cash-and-carry, the entire line of jeans were “try-on only.” Shoppers can try on the various styles and sizes, choose a denim wash, and the sales associates will place the order (free shipping included) for you.

    At the Boll and Branch in Short Hills, NJ, the luxury sheets, bedding and pillows are meant to seen and touched – but not carried out the front door. Orders are completed in the store and delivered by mail. The founders plan to open 20 more retail outlets.

    I think Everlane and Boll and Branch are excellent examples of innovative retailers melding the online and offline models. Instead of being stagnant, each brand is evolving to deliver a meaningful, omni-channel experience for the consumer.

    Stores that haven’t changed their business model in 20 years and simply lament “brick-and-mortar is dead” are signing their own death notice.

    Retailers that take chances, and yes, make mistakes, and remain nimble will vanquish their competition.

    And that’s a lesson to take into 2018.

    Comments? Observations? As always, send them to me at .

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    KC's View:

    Published on: December 20, 2017

    by Kevin Coupe

    It is a fact of our technological age that many companies know far more than they used to about their customers. Or, at least have access to more data about the customers. Many have actionable data but don’t actually use it to its full potential. In the words of the old English proverb, “There's many a slip 'twixt the cup and the lip.”

    But apparently there is such a thing as too much action on customer knowledge.

    The Washington Post had a story the other day about how “Netflix sent out a tweet Sunday that roasted a subset of its most devoted users over an open fire: those who are obsessively watching its heavily promoted holiday movie ‘A Christmas Prince’.”

    The tweet read as follows:

    “To the 53 people who've watched A Christmas Prince every day for the past 18 days: Who hurt you?”

    Now, let’s look beyond the inherent snark of the tweet. (I like snark a lot, but I think it is risky to mock your paying customers.)

    The Post notes that some Netflix users found the tweet to be “creepy,” because it exposed to the light exactly how much Netflix knows about its customers’ viewing habits. Speaking as a devoted and longtime Netflix user, I’ll concede that I knew they were paying attention … in many ways, this is a good thing, because it allows Netflix to make more personalized recommendations.

    But the reaction suggests that there is such a thing as going too far.

    It points to the Eye-Opening reality that companies have to be careful not just about how they use customer data, but how they communicate about their actions.
    KC's View:

    Published on: December 20, 2017

    Cheddar has an interview with Stew Leonard, Jr., CEO of the iconic Connecticut-based retail stores, in which he expresses his concerns about Amazon’s growing presence in the food business, especially with its acquisition of Whole Foods.

    According to the story, he told Cheddar “that one of his biggest concerns is the amount of ‘data mining’ the tech giant will be able to do. He gives an example of what information Amazon might be able to get if it offered one of his company’s famous perks.

    “You take your receipt up to our ice cream parlor, you give it to them, and you get a free cone if you spend over $100. We don’t know who that customer is, it’s really like a UFO. Whole Foods is going to know exactly who that customer is: they’re going to know how they shop, what types of foods they’re buying.”

    This could, he said “give Amazon an advantage in how it markets to its customer.”
    KC's View:
    Actually, I’ll take it one step farther than that.

    It will give Amazon an advantage … one that it will not hesitate to exploit over and over and over.

    I want to be fair to Stew here, so let me say at the outset that I’ve been shopping at Stew Leonard’s original Norwalk, Connecticut, store for more than 30 years. (I once did the calculations. Conservatively, I’ve spent a minimum of $150 a week, 48 weeks a year, for 30 years … which adds up to $216,000. Which means that if I had cashed in all those receipts for free ice cream cones, I’d probably be about 400 pounds.) I’m not just a Stew Leonard’s customer. I’m a fan … I think in many ways, it is the very definition of a unique, differentiated retail offering.

    That said … if after more than 30 years I stopped shopping at Stew’s, they wouldn’t know it. They’d never send me an email or make a phone call to ask what changed, or if I’ve made a decision to shop elsewhere.

    Unlike Amazon … which knows exactly what I am spending, what I’m spending it on, and how often. I know this because they reach out to me all the time. There’s every reason to think that when they turn Prime into Whole Foods’ loyalty program, they’ll extend this capability to Whole Foods.

    But if Stew Leonard’s doesn’t know, it is because they’ve made a decision not to know. There are a lot of reasons - some of them even are perfectly legitimate - not to have any sort of program that creates actionable data and then acts on it. But this is a choice, not an inevitable fact of retail life.

    Published on: December 20, 2017

    CNBC has a story about how “increasingly across the US, companies … are setting up locker systems in luxury apartment complexes, office buildings and retail operations, where packages can safely be kept (typically for a small fee), hopefully preventing so-called porch pirates or other delivery mishaps.:”

    The reason: Almost 20 percent of US households has been a victim of package theft.

    “Package-holding lockers become especially important around the holiday season, when shoppers stress over tracking and receiving last-minute gifts that they can't afford to lose or reroute elsewhere.”

    The story goes on: “Amazon already has many of its lockers planted at shopping centers and malls, inside Whole Foods and other convenience stores including 7-Eleven and Rite Aid, and at some fitness centers.

    “In a separate push, FedEx this year is encouraging its customers to have packages delivered to Walgreens Boots Alliance or other ‘hold’ locations, including Kroger and Albertsons, as part of its delivery strategy. This would save FedEx time and money, where its drivers don't have to go door to door, delivering package by package.

    “The same can be said for UPS, which launched a similar initiative in 2014, creating an Access Point network of thousands of pickup locations inside grocery stores, dry cleaners and other retailers.”
    KC's View:
    It is fascinating to see how this entirely new business model has sort of cropped up because of momentum created by a simple consumer need. The only thing I don’t understand is why every post office in America doesn’t have an Amazon Lockers installation; in rural markets, Amazon could actually provide some sort of incentive to have people come in and pick up their purchases as opposed to having them delivered.

    Published on: December 20, 2017

    The Washington Post reports that “a new analysis of government data from the Bureau of Labor Statistics reveals a surprising disparity” when it comes to job loss and creation in the retail sector - “the retail industry, which shed the most jobs last year (54,300), seemed to push women out while offering more opportunities to men … Between October 2016 and October 2017, women who worked in the country’s stores lost 160,300 jobs, while 106,000 men found new work in the field.”

    One theory about this disparity: “As hiring ramped up, so did spending on big-ticket items, including furniture and appliances — and men tend to dominate those sales roles, which have historically come with higher commission payments.”

    But there’s another theory that isn’t so great for men: “Women now outpace men in college enrollment … so they might be leaving some retail jobs to pursue more lucrative options.”
    KC's View:
    Women in general are smarter than men and better than men, so it makes sense that they’ll evolve into career paths that will serve them better than men. I’ll buy that version of history.

    Published on: December 20, 2017

    In Minnesota, the has the first of a four-part series about how “millions of consumers around the world are making similar choices — to buy and eat food that is more pure and produced in ways less harmful to the environment. Those decisions in the grocery aisle are transforming the agricultural economy of Minnesota and the Midwest.

    “Farmers are under pressure from consumers and food companies to adopt new techniques that take less of a toll on the environment, and to take better care of animals they raise. Sales of grocery shelf staples such as Wheaties, Betty Crocker cake mixes and some packaged meat products are flat or in decline, forcing food industry giants such as Minnesota’s Cargill, General Mills and Hormel to rethink the kinds of products they sell.”

    It is, Cargill CEO David MacLennan says, “the challenge of our time for the food and agriculture industries.”

    Fascinating … and you can read it here.
    KC's View:

    Published on: December 20, 2017

    Business Insider reports on how Citi research analyst has sent a note to her investor clients saying that “it has grossly underestimated Walmart this year,” and upgraded the retailer’s rating from “neutral” to “buy.”

    "Walmart's e-commerce operations are emerging as a true challenger to Amazon," Kate McShane wrote in her note, adding, “We sat on the sideline with this name in '17, which proved to be a big mistake. Despite the stock's run-up, we think there is even more to come, particularly considering Home Depot and Costco a re trading at a premium to Walmart.”

    The story says that McShane identified Walmart’s strengths as “its grocery offering, everyday-low-price positioning, and ‘increasingly-seamless integration’ of its stores and website, saying all three would ensure strong traffic to stores.”
    KC's View:

    Published on: December 20, 2017

    Quartz reports that Ralf Kleber, who runs Amazon’s German operations, recently said that “it’s not a question of if, but when” Amazon would open up brick-and-mortar stores there.

    While Kleber did not set a date for when Amazon would open stores in Germany, “Kleber said that Amazon’s stores in Germany could start out on a small scale, in the same way that Amazon Fresh, its online grocery service, was first tested for six years in Seattle before gradually expanding to other cities.”

    The story notes that Amazon has been successful in Germany, doing roughly 25 percent of the country’s e-commerce sales, though e-commerce has only managed to generate about 10 percent of total retail there.
    KC's View:

    Published on: December 20, 2017

    • The Chicago Tribune reports that next July Target plans to open its smallest store ever - 12,800 square feet - in the Chicago neighborhood of Wicker Park.

    The story notes that “the smaller stores are designed for urban areas, dense suburban neighborhoods and college campuses, where traditional full-sized Targets don’t fit. To make the smaller size work, stores carry a trimmed-down range of merchandise Target says it tailors to residents and commuters in each location.”
    KC's View:

    Published on: December 20, 2017

    Got the following email from an MNB reader after we wrote the other day about Kroger opening a standalone restaurant:

    My girlfriend and I recently had the pleasure of dining at Kroger 1883, which is not far from her home.  The entrees, all made from scratch, were exquisitely tasty, which unfortunately left nothing to take home.  We mused whether portions of the menu might be banned for being too addictive; wondering if would be labeled Schedule I or II.  We previously had a favorite appetizer at a nearby pub, but it doesn’t hold a candle to Kroger’s offering.  Service was exceptional, genuinely friendly and timely, in a warm appealing atmosphere.  We were truly impressed and look forward to returning.
    I had an 1883 Bourbon, garnished with a thin fruit peel, dark cherries and a gigantic ice cube in an Old Fashioned glass.  A recent article described patrons having to wait up to an hour to be seated; we were lucky to be seated after 7.  Waiting restaurant patrons have an attractive  new state-of-the-art Kroger Marketplace next door.  One of the learnings may be that perhaps Kroger should make their next restaurant a bit larger.

    We posted an email yesterday from MNB reader Paul Schlossberg in which he talked about retail Darwinism, prompting MNB reader Joe DiVincenzo to respond:

    I thought Paul Schlossberg’s comments regarding Retail Darwinism to be close.  I believe the strategic response is “It Depends”.  Sometimes adapting means deciding which areas you have a strategic advantage in, how you can leverage that both now and in the future, and which businesses it might actually make sense to walk away from at some point as you adapt to a changing world.

    Look no farther than the once mighty Eastman Kodak.  Ironically they invented Digital Photography.  Rather than exploit this new technology knowing they would slowly start to cannibalize their own film sales while maintaining the relationship with their Consumers, they let the rest of the world cannibalize their business, which from the consumers perspective was saving memories, rather than exposing film.  I remember when if you lived in Rochester, either you or someone in your family and many of your friends worked for Kodak.

    Adapt or Die.

    From MNB reader Michael J. Eardley:

    Reading all of the shared experiences of what used to be the pinnacle of tech devices and evolved bricks and mortar shopping, I just have to wonder if the people leading companies challenge themselves to experience their delivery of experience.

    Having had three horrible experiences on American Airlines in the past month I found myself wishing that one of their executives were flying with me. They would have been embarrassed beyond words. I realize that flying is complicated and difficult but the way they are unprepared and unable to communicate the situation happening leads me to be scared for my safety.

    What are people experiencing right now in your business? If it is unacceptable to you what are you doing to change it tomorrow!
    If you don’t have a system to personally experience your product or service, you do not deserve to lead.

    Norman Mayne would never allow a bad experience to be repeated.


    On another subject that we’ve been discussing here, from another reader:

    Hope you can handle one more Apple service story. Please don’t use my name - I know the store manager, which makes this all the more funny (I guess).

    Went in for service on my iPhone. Phone would open up, but then the touch screen wouldn’t respond at all. I was signed in by one of “greeters” and was told it would be about an hour till service and I should “feel free to walk around the mall” (to check out the competition?), and they would send me a text right before they were ready for me.

    I explained that this would be difficult, because MY PHONE DID NOT WORK, so he said I should just come back in an hour and they would get me “right in”.

    Back in an hour, checked in with the same guy, and was told they were sorry, but it would be another 30 minutes and, “didn’t you get our text?”. Gotta love it.

    Regarding new bag bans in various communities, one MNB reader wrote:

    Agree or not, bag bans do not and are not working!! There is more plastic going into landfills than ever before. Austin TX bag ban opened the door for the new heavier plastic reusable bags which uses 5 times more plastic per bag. And at the end of the day they too end up in landfills.

    Recycling is still the key and always will be the long term solution. The benefits are still proven to this day.

    And from MNB reader Joe McGowan:

    More to be addressed is the amount of plastic and styrofoam generated by fast food locations that is often not recycled thrown into the trash.

    But another MNB reader wrote:

    How about people be responsible citizens that are accountable for themselves and their actions? I and several neighbors all reused the plastic bags as garbage bags in the bathroom or when we walk our dogs. We now shop in the next town over that has no bag ban or we have to buy trash/dog bags. We have a large homeless problem that should be more of a focus rather than plastic bags.

    Responding to our Instant Pot story yesterday, one MNB reader wrote:

    I bought an Instant Pot for us on Cyber Monday and immediately prepared a meal using chicken breast… worked out remarkably well.   I was incredibly impressed with the cooking time and quality of cooking dense vegetables like potatoes or carrots without the need to chop them into really small pieces.  
    We have much to learn about using our Instant Pot, but we already have big plans to use it for the big family Christmas dinner we are hosting on Saturday…..even though we have a double oven, this becomes one more tool in the “cooking tool belt”.   I’ve already sent one to each of my siblings as Christmas gifts.

    MNB reader Matt Erickson wrote:

    No idea how you missed it.  It was a top seller on Amazon last year in 2016 also.  I am a convert … ate my Instant Pot yogurt this morning for breakfast.

    Finally, chiming in on the ongoing discussion about online vs. bricks-and-mortar retailing, MNB reader Christy Meyer wrote:

    I also had a great (and a pleasantly surprising) experience at our local Best Buy. Honestly, I’ve never had a bad experience there, but this time was a little special.

    Had an associate, Billy, who said he actually worked on the mobile phone side, walk my husband and I over to the camera section, stayed with us as he worked with the camera-specific sales associate to get what we needed and chatted and joked with us along the way. As he was walking us to the front of the store to pay, he specifically thanked us for coming into the store and referenced how we didn’t have to since there are so many online and other B&M stores we could’ve gone to.

    I was really impressed with the level of service, how he stayed by our side the whole time and his sincerity. Nice job, Billy and Best Buy! I certainly don’t mind getting off my computer to go to a store when I get that kind of service.

    No argument here.
    KC's View: