Vocabulary > Economy > Shopping, Retail
Joe Heller has been the editorial cartoonist
for the Green Bay Press-Gazette since 1985,
before that he was the cartoonist for the West Bend News.
28 November 2011
The Pittsburgh Post-Gazette
19 November 2010
Related > Holiday shopping
budget shoppers USA
used plastic shopping bag
cartoons > Cagle > Holiday shopping / Black Friday
at the mall
supermarket giant Tesco - the UK's biggest
Woolworths / Woolies
and consumer goods giant
customer / patron
high street / retail sector / retail
high street shops / stores
major dollar chains > Dollar General, Family Dollar and Dollar
high street sales
wholesale prices USA
venture capital group circling retailer WH Smith
entertainment chain > Zavvi
retail sales USA
big retailer USA
Wal-Mart Stores - the world’s largest retail chain
Wal-Mart, a chain of discount stores started by Sam Walton in
has become a central figure in scores of social, economic and political debates,
from health care to immigration to gun control.
Supporters contend that the chain's legendary low prices have democratized
allowing low-income households to afford flat-screen televisions and nine-layer
Critics say those low prices have depressed domestic wages
and exported manufacturing jobs to foreign countries,
hurting Americans more than helping them.
Rob Rogers is the staff cartoonist at the Pittsburgh
In 1999 he was a finalist for the Pulitzer Prize.
28 November 2011
p. 17 17
The South Florida Sun Sentinel
1 December 2008
holiday shopping season
holiday shopping season
the day after Thanksgiving / the first official day of the U.S. holiday shopping
Cyber Monday, the first Monday after
'Sorry, we're closed'
The Columbus Dispatch
19 November 2010
discount grocers Aldi and Lidl
discounts and giveaways
price war USA
sale / sales
Boxing Day sales
difficult trading over the crucial Christmas period
annual cost of a child's toys: £715
supermarket price war
value for money
compete on price
be competitive on price
knock £5 / 50%
be priced out
be worth ...
our lowest fares
go on sale
Retailers Try to Adapt
to Device-Hopping Shoppers
December 21, 2012
The New York Times
By CLAIRE CAIN MILLER and STEPHANIE CLIFFORD
Ryan O’Neil, a Connecticut government employee, was in the
market to buy a digital weather station this month. His wife researched options
on their iPad, but even though she found the lowest-price option there, Mr.
O’Neil made the purchase on his laptop.
“I do use the iPad to browse sites,” Mr. O’Neil said, but when it comes time to
close the deal, he finds it easier to do on a computer.
Many online retailers had visions of holiday shoppers lounging beneath the
Christmas tree with their mobile devices in hand, making purchases. The size of
the average order on tablets, particularly iPads, tends to be bigger than on
PCs. So retailers poured money and marketing into mobile Web sites and apps with
rich images and, they thought, easy checkout.
But while visits to e-commerce sites and apps on tablets and phones have nearly
doubled since last year, consumers like Mr. O’Neil are more frequently using
multiple devices to shop. In many cases, they are more comfortable making the
final purchase on a computer, with its bigger screen and keyboard. So retailers
are trying to figure out how to appeal to a shopper who may use a cellphone to
research products, a tablet to browse the options and a computer to buy.
“I’ve been yelling at customers for two years, saying, ‘Mobile, mobile, mobile,’
” said Jason Spero, director of mobile sales and strategy at Google. “But the
funny thing is, now we’re going to say: ‘Don’t put mobile in a silo. It’s also
about the desktop.’ ”
The challenges are daunting, though. It is technically difficult to track
consumers as they hop from phone to computer to tablet and back again. This
means customers who, say, fill shopping carts on their tablets have to do all
the work again on their PCs or other devices. The biggest obstacle, retailers
say, is that the tools used to track shoppers on computers — cookies, or bundles
of data stored in Web browsers — don’t transfer across devices.
Instead, retailers are figuring out how to sync the experience in other ways,
like prompting shoppers to log in on each device. And being able to track people
across devices gives retailers more insight into how they shop.
The retailers’ efforts are backed by research. While one-quarter of the visits
to e-commerce sites occur on mobile devices, only around 15 percent of purchases
do, according to data from I.B.M. According to Google, 85 percent of online
shoppers start searching on one device — most often a mobile phone — and make a
purchase on another.
At eBags, customers are shopping on their tablets in the evening and returning
on their work computers the next day. But eBags has not yet synced the shoppers
across devices, so customers must build their shopping carts from scratch if
they switch devices.
“That is a blind spot with a lot of sites,” said Peter Cobb, co-founder of
eBags. “It is a requirement moving forward.”
At eBay, one-third of the purchases involve mobile devices at some point, even
if the final purchase is made on a computer.
At eBay, once shoppers log in on a device, they do not need to log in again.
Their information, like shipping and credit card details and saved items, syncs
across all their devices. If an eBay shopper is interested in a certain handbag,
and saves that search on a computer, eBay will send alerts to her cellphone when
a new handbag arrives or an auction is about to end.
“They might discover an item on a phone or tablet, do a saved-search push alert
later on some other screen and eventually close on the Web site,” said Steve
Yankovich, who runs eBay Mobile. “People are buying and shopping and consuming
potentially every waking moment of the day.”
ModCloth, an e-commerce site for women’s clothes, said that while a quarter of
its visits come from mobile devices, people are not yet buying there in the same
proportion, though they are becoming more comfortable with checking out on those
“She’s visiting us more on the phone, but she’s actually transacting somewhere
else,” said Sarah Rose, vice president of product at ModCloth.
For example, a shopper will skim through new arrivals on her phone while on the
bus and add items to her wish list, then visit that evening on her tablet to
make a purchase, Ms. Rose said.
To take advantage of this behavior, ModCloth urges shoppers to log in after just
a few clicks on the Web site on a phone or computer, so information like credit
card numbers and items saved in a shopping cart on another device are
accessible. Then if a laptop shopper adds a skirt to her shopping cart and
later, it is about to sell out, ModCloth can send her an e-mail, which she will
often click on her phone to buy the skirt, Ms. Rose said. Logged-in users who
visit the site using multiple devices are 2.5 times more likely to place an
order than those on a single device, according to the company.
On Etsy, where 25 percent of the visits but 20 percent of the sales come from
mobile devices, the site syncs items in the shopping cart, favorite items,
purchasing history and conversations with sellers.
Many other e-commerce sites, however, still lack an easy way for shoppers to use
The New York Times logged in to the Web sites of some large retailers and added
items to the shopping cart, then logged in to the mobile site or app to see if
the cart was reflected there.
Amazon.com, Nordstrom, Target, Macy’s and Gap showed items across devices.
Walmart did, too, though with some hiccups; it required logging out of and back
into the mobile site to update the cart, and on the app, a shopper had to choose
the “sync with online cart” option.
Others, though, did not sync across devices, including Newegg, Kohl’s,
RadioShack and J. Crew, so shopping on a different device required filling the
shopping cart from scratch.
Newegg is working on syncing the shopping carts, said Soren Mills, its chief
marketing officer, because customers are asking for that. The information
gleaned about customers that way is also critical for retailers, he said, so
they can personalize sites and offers based on consumers’ browsing and purchase
“We have to recognize the customer, so we look to get a single view of the
customer,” he said.
Retailers could use information like this to show different ads to shoppers with
cellphones standing in a store at lunch hour than to those using a tablet at 9
p.m., Mr. Spero at Google said.
Despite the hesitance of shoppers like Mr. O’Neil to buy on mobile devices, some
technology industry analysts say people just need time to grow comfortable with
“It’s just like in the old days, 15 years ago, the conversation was people are
researching what they want on their PCs but still going to the store to buy,”
said Marc Andreessen, a venture capitalist. Mr. Andreessen is involved with
e-commerce companies like eBay and Fab, both of which he said had strong mobile
sales. “I think that’s a temporary phenomenon.”
Retailers Try to Adapt to Device-Hopping
Shoppers, NYT, 21.12.2012,
Lean Days, Even Stores Shrink
The New York Times
By STEPHANIE CLIFFORD
Calif. — A temporary wall slices the Anchor Blue store here in half. On one side
are abandoned dressing rooms, a few mannequins and no customers. On the other
are racks jammed with clothing and accessories — and more customers than ever
coming into the store.
Tom Shaw, the head of Anchor Blue, a clothing chain for teenagers, looked with
approval at the 2,500 square feet of empty space that his company still rents.
Foot traffic is up more than 7 percent, the chain says, and sales have increased
nearly 23 percent since the trial remodeling last year.
“We don’t want a department-store feel,” Mr. Shaw said. “With that much product
in that much space you can get lost, not know where to go.”
Anchor Blue is among a growing number of retailers thinking small — chopping off
big chunks of stores or moving to more efficient spaces. The change reflects two
trends in the retail world: Chains looking for new ways to cut costs in the sour
economy, and consumers demanding a less sprawling shopping experience as they
spend with greater purpose.
“The customer walks in the door, and often sees a huge selection of stuff in a
multibrand store, and can’t figure out what to buy and ends up buying nothing,”
said Paco Underhill, founder and chief executive of Envirosell, a
Manhattan-based company that advises stores on shoppers’ behavior. “We have
reached the apogee of the big box, meaning that we can’t grow the store or the
shopping mall any bigger, or get any more time or money out of somebody’s
Big chains like Bloomingdale’s and Nike are trying smaller stores, as are
specialty retailers like Charlotte Russe. Mr. Underhill said most of his clients
are exploring the idea, which can require creative thinking.
The new Bloomingdale’s in Santa Monica, Calif., for example, saves space with
dressing rooms that retract into the ceiling. Charlotte Russe uses free-standing
glass walls that can be rearranged. At Nike, the cash registers are wired into
The smaller stores help clean retailers’ balance sheets. Rents drop, and smaller
amounts of inventory cost less. Retailers can also reduce payroll costs because
fewer employees are needed. At the Anchor Blue store here in Santa Ana, three
employees now work on the floor instead of four.
Retail chains “saw their lives flash before their eyes in the financial crisis
downturn,” said John D. Morris, an analyst with BMO Capital Markets, a financial
services provider. “When you’re looking at such a severe slowdown as they were
in consumption, you worry about the commitment in real estate.”
Mr. Shaw said he reduced the amount of clothing in the Santa Ana store by about
15 percent, removing many slower-moving items like unpopular sizes — and
increasing profitability. As leases expire on its 118 stores, Anchor Blue is
moving into spaces about half their size .
“You’re placing a sizable bet when you’re buying a lot of inventory and filling
up a 6,000-square-foot box,” he said.
The financial success of many smaller stores is simple, retail analysts and the
stores say: Smaller spaces are cheaper, and can be easily changed to carry the
most profitable, fastest-selling inventory. The stepped-up foot traffic at the
Anchor Blue store in Santa Ana, and the sales increase, for example, are both
above the chain’s averages.
“It certainly enhances the productivity,” Mr. Morris said of the smaller spaces.
Bloomingdale’s store in Santa Monica, which opened this summer, is about 105,000
square feet on two floors, less than one-eighth the size of the chain’s
Manhattan flagship store. The developer packaged in the third floor, but
Bloomingdale’s declined the extra room, said Michael Gould, chairman and chief
executive of Bloomingdale’s.
Mr. Gould said he wanted a smaller store to move through inventory faster. The
Santa Monica store dropped two slower-moving categories, home and children’s,
that are often found in other Bloomingdale’s stores. It has also saved space
with innovations like a mobile rack, that resembles those dry cleaners use, on
the second floor ceiling that moves mannequins and clothes.
“You have a store that’s turning very quickly,” he said.
In addition, Mr. Gould said, many shoppers have responded to a more focused
retail experience — stores that have been stripped of the distractions and
temptations of unwanted merchandise — as the success of Bloomingdale’s smaller
Manhattan store in SoHo, opened in 2004, has demonstrated.
“We can be very specific to a customer and to a marketplace, and that’s what we
need to do,” he said.
Nike is also looking at flexible layouts as it experiments with smaller stores.
The typical Niketown store is more than 50,000 square feet, while its prototype
“brand experience” store, opened in Santa Monica in August, is just 22,000
square feet. Nike has no plans to open more Niketowns, opting instead for
smaller options like the “brand experience” store.
The driving force was to make shopping simple, said Tim Hershey, Nike’s vice
president and general manager of North American retail. “Customers are always
asking us to make it easy,” he said.
Almost all the elements of the new Nike store can be rearranged at a moment’s
notice. Each wall contains horizontal slats about six inches apart, and almost
every piece of hardware — the circle of metal that holds a soccer ball, the wire
cages that contain socks — can be hooked into the wall slats. Freestanding
tables and locker-compartmentlike display cases are on wheels. A big orange
station where the cash registers are housed looks like the only permanent
fixture in the store — but it is not.
“It’s wired to be relocated in multiple places,” Mr. Hershey said. “We like
where it’s at but we haven’t been through a holiday. Live and learn.”
Charlotte Russe, which has more than 500 outlets nationally, is also
experimenting with a new concept store in Santa Monica that is about 25 percent
smaller than the norm.
Jenny Ming, the chief executive, ordered freestanding glass walls to distinguish
between types of clothes. “It just makes it more shoppable,” she said. “So many
stores now, it’s just big, you throw everything in there,” Ms. Ming said.
For maximum versatility and efficiency, each fixture has been designed for
multiple purposes. A metal rod that lies perpendicular to the wall can hold
shoes on plastic hooks, underwear looped through a leg hole or hangers.
Ms. Ming tried stacking shoe boxes on the selling floor so customers could
select their sizes without waiting for a clerk. But that backfired, she said, as
boxes were scattered, requiring extra staff (and money) for cleanup.
The boxes are back in the storage area, the experience pointing to an axiom of
the new smaller-is-better movement. “It’s building in as much flexibility as
possible,” Ms. Ming said.
In These Lean Days, Even Stores Shrink, NYT, 9.11.2010,
In Recession, Strategy Shifts for Big Chains
June 20, 2009
The New York Times
By STEPHANIE ROSENBLOOM
Shopping as we know it is on the brink of major change.
Hammered by the recession, some of the nation’s biggest retailers are seizing
the moment to reinvent their business strategies. And the impact will mean both
sweeping changes in the merchandise on their shelves and subtler alterations,
like how many pantyhose to keep in stock.
High-end stores like Neiman Marcus, Saks and Coach will offer more midpriced
merchandise. Many chains, including Wal-Mart, will carry less inventory and
fewer brands. The likes of Sears and J. C. Penney will put self-service
computers in stores so customers can browse collections or buy out-of-stock
items. And retailers of all stripes will offer more exclusive merchandise and
more attentive customer service.
One of the biggest changes consumers are likely to see is greater
personalization and regionalization of merchandise.
An initiative known as “My Macy’s” requires the retailer’s merchandisers and
other planners to go into stores each week to learn from the sales staff — who
keep logs at the cash registers — what shoppers are requesting, snapping up or
For instance, when strapless and bare-shouldered dresses were selling well
everywhere except Salt Lake City and Pittsburgh, Macy’s employees in those
stores knew the problem was that their customers wanted more modest dresses. So
they passed that information on to the merchandisers. Out went the strapless
dresses; in came dresses with cap sleeves. And sales went from lackluster to
Under the new system it will not be unusual for a local Macy’s to stock the
merchandise customers request, be it wide-width shoes or Sean John suits, and
for those offerings to be different from the ones in a Macy’s store 100 miles
“I think what Macy’s is embarking on is perhaps the largest transformation in
our company in a couple of decades,” said Terry J. Lundgren, president and chief
The Macy’s change is just one example of a wide range of initiatives retailers
are pursuing as they struggle to cope with an economy where sales are lower than
they were just a few years ago.
At high-end stores, the era of ever-escalating prices on luxury goods appears to
be over. In the future, consumers will still be able to buy chic brand names,
but at a wider range of prices.
“Our customer loves our brands,” said Stephen I. Sadove, chairman and chief
executive of Saks. “They don’t want to trade down to lower brands. But they want
more of a range in price within the brands that they love.”
And that is what retailers intend to give them. Burton M. Tansky, president and
chief executive of Neiman Marcus Group, told investors on a conference call last
week that “we’re working with the designers to try and ease a portion of their
collections into a new price range.”
Prices will also be lower at some “affordable luxury” chains, like Coach, which
is increasing the proportion of handbags it sells for less than $300. About 50
percent of the company’s handbags will cost $200 to $300, in contrast to about
30 percent of handbags last year.
Another change is that consumers will have fewer brands from which to choose.
Wal-Mart, Target, Home Depot, and PetSmart are just a few of the chains
winnowing their brands. As Home Depot’s executive vice president for
merchandising, Craig Menear, put it: consumers are “time-starved” and “looking
for simplification in the entire shopping experience.”
That may delight minimalists, because it will be easier to find items on the
shelves. But it also limits choice.
Another potential drawback for consumers is that stores may run out of stock
more quickly than in the past because, as Mr. Lundgren of Macy’s explained,
“retailers learned that you can’t get out of the merchandise that you ordered
“Instead,” he said, “you’re more likely to see retailers ordering fewer of each
individual size and taking that risk that they’ll sell out and not capture every
sale, rather than the risk of having too much inventory left over to mark down.”
Another trend is on the horizon: seasonal transitions for apparel will probably
have shorter lead times. With strapped consumers buying only what they need when
they need it, it has occurred to retailers that selling swimsuits to New Yorkers
in early March is not necessarily a winning strategy. And so chains are
beginning to work with suppliers to shorten the time between ordering and
Consumers will also see even more of the exclusive collaborations between
retailers and prominent designers that are so prevalent today. That will help
distinguish stores as well as avoid price wars because the same items will not
be sold at multiple chains.
Yet another change will be the obliteration of any remaining divide between
online and in-store shopping.
In Sears stores, “appliance research centers” with computers are enabling
customers to compare local competitors’ prices. (If Sears does not offer the
best price, it will match the lowest offer and hand over 10 percent of the
difference.) Four J. C. Penney stores in Dallas are testing “FindMore” machines
the size of arcade games, letting customers see every item J. C. Penney sells
and find out if the item they want is in the store or online.
Shopping by cellphone will also become widespread.
“Everything we are developing is with a mind-set that it’s going to be running
on a handset,” said J. C. Penney’s chief information officer, Thomas M. Nealon.
Despite all the new technology, consumers will be getting more attention from
sales staff. During the last few years, retailers did not have to work hard to
separate consumers from their dollars.
But those days are over. More middle-market chains are striving for
Nordstrom-quality service to win customers. Even Home Depot has adopted its
“most extensive customer service training ever,” its chairman and chief
executive, Frank Blake, told investors and retailing analysts last week.
Of course, luxury chains have always featured a high level of attentiveness. But
the chains say that in this economy, customers have heightened expectations.
Saks, for one, has invested tens of millions of dollars in the last year on
software that provides its sales staff easy access to information about client
purchases and preferences, so that a returning customer might be greeted by a
sales representative who recalls the shopper’s suit size and penchant for
Christian Louboutin heels.
Economists and analysts forecast that it will take up to 10 years to return to
2007 levels of consumer spending — which makes now a good time for retailers to
re-imagine the future. Paul A. Laudicina, chairman and managing officer of A. T.
Kearney, the management consulting firm, noted that major consumer innovations
like Neoprene and Teflon came out of the Depression.
Mr. Lundgren pointed out that if consumers were still throwing money around,
stores might not want to alter strategies that were still working.
But with today’s recession, he said, “now is the time to aggressively rock the
Strategy Shifts for Big Chains, NYT, 20.6.2009,
Retail Sales Are Weakest in 35 Years
December 5, 2008
The New York Times
By STEPHANIE ROSENBLOOM
The nation’s retailers turned in the worst sales figures in at least a
generation on Thursday, starting the holiday shopping season with double-digit
declines across a broad spectrum of stores.
For many chains, the precipitous sales drops that took hold in September and
October got worse, not better, in November, despite relatively strong sales in
the few days after Thanksgiving.
The International Council of Shopping Centers, an industry group, described
November’s figures as the weakest in more than 35 years. Declines were recorded
in every retail segment the group tracks, with the biggest coming from
department stores, with sales down 13.3 percent compared with November a year
ago, and specialty apparel retailers, down 10.4 percent.
Some retailers, though, have begun to figure out how to manage in the bleak
environment, selling huge amounts of merchandise at steep discounts to generate
cash. That will erode profits, of course. Department store profits will most
likely plummet 20 to 60 percent in the final three months of the year, said Bill
Dreher, senior retailing analyst with Deutsche Bank Securities. But retailers
who are unloading merchandise early in the season are at least demonstrating an
ability to take control.
“Even if they’re giving away the product, it reduces inventory levels and keeps
the problem from continuing,” Mr. Dreher said. “It shows retailers are being
Retail stocks rallied Thursday as investors interpreted the sales report as
showing that, with sufficient discounts, goods can be sold in volume despite the
poor economy. The Standard & Poor’s retail index rose 1.5 percent.
The discounts being dangled by stores are the biggest retailing analysts have
ever seen. “When did you ever see, on Dec. 1, 70 percent off apparel on the high
end?” said Claire Gruppo, managing director of Gruppo, Levey & Company, a New
York investment bank. “You just don’t.”
Any retailer that refused to trot out jaw-dropping bargains in November paid the
For example, Abercrombie & Fitch, the chain that uses sexy bodies in seductive
poses to sell clothes to teenagers and young adults, has refused to get on the
discount bandwagon. In November, sales at stores open at least a year, an
important measure of retail health, fell a whopping 28 percent for the company,
in contrast to a 2 percent increase for the period a year ago.
That is a far worse decline than previous months: Sales at Abercrombie & Fitch
stores open at least a year were down 14 percent in September and 20 percent in
Saks, on the other hand, has driven consumers into shopping frenzies with
eye-popping deals on luxury names like the Armani Collezioni and Zac Posen. The
tactic worked: In November, Saks had only a 5.2 percent decline in sales at
stores open at least a year, clawing its way up from months of double-digit
Other stores that improved their lot in November took a page from the same
playbook. Neiman Marcus, for example, has also been selling luxury goods at
startling discounts. Sales at Neiman Marcus stores open at least a year fell
11.8 percent in November — better than the 15.8 percent drop in September and
the 27.6 percent dive in October.
“If you don’t understand the consumer and his mood right now and you’re doing
things as usual,” said Walter Loeb, president of Loeb Associates, a consultant
firm, “you’re not going to get any business.”
Stunning declines have become the norm in retailing since sales first plunged in
September amid the financial crisis. The November figures indicate the downturn
is migrating to some discount and warehouse stores, some of which even had sales
growth in October.
Ken Perkins, president of Retail Metrics, a research firm, said either Wal-Mart
Stores was stealing market share from its bargain competitors or the whole
sector was softening.
At Target, sales at stores open at least a year tumbled 10.4 percent, in
contrast to a 10.8 percent increase a year ago. Sales at Target were down 3
percent in September and 4.8 percent in October.
Sales at Kohl’s stores open at least a year sank 17.5 percent, in contrast to a
10.2 percent increase last year. Sales at Kohl’s stores dropped 5.5 percent in
September and 9 percent in October. Sales at Costco were down 5 percent in
November after a 7 percent increase in September and a 1 percent dip in October.
Even some stores with October sales increases lost their edge in November.
Children’s Place, which had a 4 percent sales increase in October, sank 7
percent in November. Aéropostale, which was up 1 percent in October, was down 5
percent in November.
Of all the major retailers, only Wal-Mart and BJ’s Wholesale Club, two of the
country’s best-known discount chains, thrived, in part because of robust grocery
sales. Wal-Mart, in fact, enjoyed the biggest grocery sales spike in its
With new lines of brand-name merchandise from makers like Sony and Samsung, and
with rock-bottom prices and an ability to move high volumes of merchandise,
Wal-Mart seems to have cornered the market on Christmas this year.
The company began the critical holiday season by exceeding expectations. Sales
at stores open at least a year increased 3.4 percent in November, not including
fuel, compared with a 1.5 percent increase a year ago.
(The company made a point of being subdued in its sales announcement, noting its
sadness that a worker, Jdimytai Damour, had been trampled to death at a Wal-Mart
in Valley Stream, N.Y., when rowdy shoppers burst through the doors on Black
Sales at BJ’s Wholesale Club stores were up 4.1 percent in November, not
including fuel, compared with a 7.7 percent increase a year ago.
Many retailers were buoyed by sales over Black Friday weekend, which increased
about 0.9 percent, compared with a 6.5 percent increase last year, according to
ShopperTrak, a research firm. Yet the weekend after Thanksgiving did not account
for the majority of retailers’ November sales. Results for the month were
weakened, many people in retailing said, by the calendar — a later Thanksgiving
this year meant fewer post-Thanksgiving shopping days in November.
“The Thanksgiving weekend improvement was not enough to significantly alter the
month’s outcome,” Linda M. Farthing, president and chief executive of Stein
Mart, said in a statement on Thursday. “We expect to continue aggressive
promotional activity through the remainder of the year.”
It was a plan echoed on Thursday by other retailers, like American Eagle
Outfitters and Kohl’s.
John D. Morris, an analyst with Wachovia whose Holiday Sale Rack Index tracks
promotions at specialty mall retailers, said discounts were up 12 percent
compared with last year. That may not sound like much, but it is the biggest
jump in the decade-long history of the index. Usually, a big promotional period
sends the index up 5 percent.
“It’s a terrible story for retailers and their margins,” said Michael Unger, a
principal with Archstone Consulting. “But if you’re a consumer looking for a
good deal, you will find it.”
Retail Sales Are Weakest
in 35 Years, NYT, 5.12.2008,
Trampled to Death by Customers
November 29, 2008
The New York Times
By JACK HEALY and ANGELA MACROPOULOS
A Wal-Mart employee in suburban New York was trampled to death by a crush of
shoppers who tore down the front doors and thronged into the store early Friday
morning, turning the annual rite of post-Thanksgiving bargain hunting into a
At 4:55 a.m., just five minutes before the doors were set to open, a crowd of
2,000 anxious shoppers started pushing, shoving and piling against the locked
sliding glass doors of the Wal-Mart in Valley Stream, N.Y., Nassau County police
said. The shoppers broke the doors off their hinges and surged in, toppling a
34-year-old temporary employee who had been waiting with other workers in the
People did not stop to help the employee as he lay on the ground, and they
pushed against other Wal-Mart workers who were trying to aid the man. The crowd
kept running into the store even after the police arrived, jostling and pushing
officers who were trying to perform CPR, the police said.
“They were like a stampede,” said Nassau Det. Lt. Michael Fleming. “Hundreds of
people walked past him, over him or around him.”
The employee, who was not identified, was taken from the Wal-Mart to nearby
Franklin Hospital, where he was pronounced dead at 6:03 a.m., the police said.
His exact cause of death has not been determined. The police said that three
other shoppers were injured and a 28-year-old woman who was eight months
pregnant was taken to the hospital for observation.
One shopper, Kimberly Cribbs, said she was standing near the back of the crowd
at around 5 a.m. on Friday when people started rushing into the store. She said
several people were knocked to the ground, and parents had to grab their
children by the hand to keep them from being caught in the crush.
“They were falling all over each other,” she said. “It was terrible.”
Crowds began building outside the Wal-Mart at 9 p.m. Thursday and grew
throughout the night, as eager shoppers queued up in a line that filled the
sidewalk and stretched toward the boundary fence of the Green Acres Mall.
At 3:30 a.m., store employees called the Nassau police to report that the crowd
was growing quickly, the police said. Officers came by to try to organize the
line, but were called away to a Circuit City, a Best Buy and a B.J.’s Wholesale
Club nearby, to deal with crowds there.
A half-dozen Wal-Mart employees lined up in the entryway trying to hold back the
crowd by pushing against the locked sliding doors, but they were overwhelmed by
the force of the crowd, Lieutenant Fleming said.
As the doors snapped open and people streamed in, several people fell on top of
one another. The 34-year-old employee who died was at the bottom of the pile,
the police said.
On Friday, Wal-Mart released a statement saying that the man who was killed had
been working for Wal-Mart through a temp agency. The company called the death “a
tragic situation,” and said it was working with police.
“The safety and security of our customers and associates is our top priority,”
Wal-Mart said in a statement.
Lieutenant Fleming said that the store “could have done more” to prevent the
“I’ve heard other people call this an accident, but it’s not,” he said. “This
certainly was foreseeable.”
Trampled to Death by Customers, NYT, 29.11.2008,
Mega-mall: Is this the future of shopping?
He's built a global empire of malls.
Now, in London,
Frank Lowy is about to unveil his boldest project yet
– just as
Does he know something we don't?
Rob Sharp reports on a £1.7bn gamble
Thursday, 23 October 2008
On a building site in west London, 8,000 contractors are
crawling across a gargantuan, soon-to-be-finished shopping centre. Lifts raise
builders in hi-vis jackets as they finish painting restaurant exteriors. Droves
of stone masons hurriedly shift huge granite slabs into their final resting
places. Sparks from welding torches cascade to the floor. Rivers of polythene
wrapping snake as far as the eye can see.
When Boris Johnson opens its doors on Thursday next week, Westfield London will
be Britain's largest urban shopping centre. Sprawling across 43 acres just north
of Shepherd's Bush Green, it will house 265 shops, with Tiffany & Co, Louis
Vuitton, Gucci, Prada and De Beers offering glitz alongside Waitrose, Russell &
Bromley, Marks & Spencer and other familiar high-street names. There will be
dozens of restaurants, a library, and two new London Underground stations to
bring in the masses. Those who drive will have the option of employing the
services of a 70-strong team of valets. Needless to say, this is no ordinary
shopping centre. Its makers are marketing it as the cutting edge of "retail
Costing £1.7bn, it is also the biggest venture – in monetary terms – that the
development company, Westfield, has ever undertaken. Back in 2004, when
Westfield bought the site, it must have seemed an irresistible way to ride the
consumer boom. Given the current economic climate, it feels like an even more
audacious move than the company may have intended. Household budgets are under
pressure; consumer confidence is far from buoyant. Earlier this week, The Ernst
& Young Item Club, an influential forecasting agency, predicted that consumer
expenditure on everything from food, clothes, holidays, household bills, home
improvements and entertainment will fall by 1.2 per cent in 2009. This compares
with an average annual growth of 3.5 per cent over the past decade.
One would think such statistics would send a shiver down the spine of even the
most hardened of businessmen. But Westfield's chairman Frank Lowy, who turned 78
yesterday, is no ordinary corporate suit. According to Australian media reports,
he boasts a fortune of £2.4bn, making him the richest man in Australia. Born in
Slovakia, he arrived in Australia in 1953 after spending a period shortly after
the Second World War in a refugee camp in Cyprus. After founding Westfield in
1959 with business partner John Saunders (who died in 1997 aged 75), Lowy has
grown his company into the biggest publically listed retail property group in
the world. It is valued at more than £26bn, and leases 10 million square metres
of retail space to 23,000 retailers in 119 centres around the world. In the
company's homeland, as many people speak of "going to Westfield" as they do of
But pulling off this audacious development is more than just a question of
battling economic forces. Local residents are far from pleased about the effects
of bus routes imposed by Hammersmith and Fulham council to serve the new centre.
Writing in the London Evening Standard this week, the novelist Sebastian Faulks
slammed the new routes planned for areas close to the development for running
through some of the capital's historic conservation areas. He also described how
the council's consultation over the new routes was radically under-resourced,
and how new buses will add unnecessary pollution and congestion to already busy
and dirty streets. In addition, the scheme – located just three miles from
London's West End – will draw customers away from already cash-strapped Oxford
Street shops. For years, Westfield London has been spoken of as the nail in the
coffin of Oxford Street.
Meanwhile, tax authorities in Australia are investigating Lowy amid claims by
the US Senate that he hid £42m from the Australian Taxation Office. But this is
all in a day's work for a man who obtained a shrapnel scar on his forehead when
fighting for the Israeli army. Westfield London, experts say, will still manage
to bring a smile to his lips.
Lowy was born into a Jewish family in 1930 in Fil'akovo, a rural town in what
was then Czechoslovakia. According to the official biography on the Westfield
website, at an early age he helped his mother to run the family grocery shop.
When the Second World War broke out, his family sold their shop and fled to
Budapest. Here, Lowy helped his older brother, John, run a metalware business,
but the family was soon hit by tragedy. When the Nazis invaded Hungary in March
1944, Lowy's father was captured and sent to Auschwitz, where he eventually
died. Without the family's main breadwinner, Lowy supported his mother by
foraging for food.
When the war ended, Lowy left Europe for Israel. On his way, he was picked up by
the British Army and spent several months in a refugee camp in Cyprus. After his
release, he reached Israel, aged 17, to join the nation's Golani Brigade, an
army unit fighting in the 1948 Arab-Israeli war.
When the war finished the same year, Lowy spent a brief time working in a bank,
and studying to become an accountant at night school. Eventually, he decided to
go to Australia, to where many members of his family had already moved. He
arrived there on 26 January 1952, carrying a small suitcase, and possessing only
a basic knowledge of English. "All those events shaped my life," Lowy said in an
interview earlier this month. "It's a requirement to have some sort of paranoia.
You have to think of what can go wrong even when times are good. So you can
never enjoy your success fully."
In Sydney, the man who would become a property magnate managed to scrape
together enough cash to buy a van. He began work as a deliveryman, and it was
then that he met Saunders, another Holocaust survivor, who had set up a small
shop in the outskirts of Sydney. The pair's first business venture together was
running a delicatessen. They soon realised that along with salami and rye bread,
newcomers from Europe needed a wider array of goods. They borrowed from a local
bank manager and used profits from the deli to buy farmland out of town. The
pair read about the popularity of American shopping malls, and in 1959 built
their first shopping centre on that land. Westfield Investments was listed on
the Australian stock exchange in 1960. Over the next two decades, the pair built
up their company to become one of the best-known shopping centre providers in
Australia, where Lowy now owns 44 malls.
In 1977, the company bought its first US shopping centre, in Connecticut, but it
was not until 2000 that the company gained its first foothold in the UK market.
In March of that year it bought the Broadmarsh centre in Nottingham, in
partnership with the investment house Hermes. The same year it also acquired
shopping centres in Tunbridge Wells, Guildford, Derby and Northern Ireland.
Now, Lowy runs his worldwide empire – across Australia, New Zealand, the United
States and Britain – with his two sons, group managing directors Steven and
Peter. Frank Lowy is based on the top floor of the 24-storey Westfield Towers in
Sydney, which his company built in 1974. The company founder's own floor has
uninterrupted views of Sydney's Opera House and Harbour Bridge, near to which
Lowy's 74-metre yacht, named Ilona IV after his mother, is berthed. It was here
that the Australian executive worked on his plan to enter the UK market – a plan
that took his three decades to perfect.
The company developed its first UK shopping centre, after demolishing an
existing mall in Derby. The £340m Westfield Derby project opened in October of
last year. It was the biggest shopping centre to open in Britain that year. Now,
Westfield hopes its west London development – located in an area known as White
City – will move shopping centre development in the UK to the "next level".
"All our projects are about evolution," says Westfield UK and Europe managing
director Michael Gutman. "In the White City project we are trying to bring
together all the knowledge we have gathered from our 118 centres in four
countries around the world. This will be our 119th. It is a unique trading area
and demographic in terms of the power and disposable income of the people who
live nearby. It is unparalleled in terms of connectivity. It contains some
phenomenal public spaces both inside and out."
The story of how Westfield created Westfield London goes back four years. It
involves a complicated series of acquisitions and joint ventures, but
essentially involved Westfield taking control of an existing scheme being
developed by fellow property firm Chelsfield in 2004.
Westfield bought out its partners in that acquisition, the Reuben brothers,
billionaire private investors, and Multiplex, the Australian construction firm.
In 2006 Westfield also took control of the project's construction from the
Australian construction firm Multiplex, which at the time was dealing with
negative press surrounding the late delivery of Wembley Stadium, which it was
also contracted to build. Westfield currently owns a half stake in Westfield
London, with the other half being owned by the property arm of the German
Before Westfield's acquisition of the development, the acclaimed British
architect Ian Ritchie had designed a concept for the shopping centre. He had
suggested a number of features, which included the interior of the centre being
covered by a fabric roof. When Westfield took control, it decided not to
continue its relationship with Ritchie and brought its own in-house designers on
board, who collaborated with out-of-house architects on specific elements of the
scheme. These external designers included a young firm of London architects,
Softroom, who designed a futuristic-looking café court called "The Balcony".
Acclaimed New York designer Michael Gabellini took charge of blueprints for "The
Village" – the separate area of the centre where the luxury brands such as
Tiffany & Co are housed.
Westfield's own architects scrapped the fabric roof in favour of a glass version
that would allow more light to enter the centre's interior. They also introduced
a street of bars and restaurants that will be open around the clock – the
"Southern Terrace" – at the centre's south-east corner, at the suggestion of
superstar architect Richard Rogers, who at that point was acting as an adviser
to former London mayor Ken Livingstone. Rogers felt the street would improve the
area's public space.
"Normally we design all of our own buildings. But when we acquired the property,
its design had already won planning permission from the council and it was under
construction," says Gutman. "On a major retail development, the planning and
circulation requires knowledge and experience. So we needed to bring on board
some specialists, which we got through Softroom and Michael Gabellini."
On a private tour with the developer late last week, two weeks before the
completion of construction, things appeared to be in impressive shape.
Approaching Westfield London from the south-east, where a new bus terminal and
specially designed, sleek-looking Shepherd's Bush Tube station sit, shoppers
ascend the shallow granite ramp or "shopping street" of "Southern Terrace". This
street is already lined with finished restaurants, outside which diners will sit
on terraces overlooking the thoroughfare. The façades of the restaurant are of
various sizes and designs to give each its own character. Overhead, various
canopies, each again of unique size and material, offer protection from the
elements. The red Westfield logo is affixed at key points to the street's
Entering through a huge glass entrance, customers encounter a massive central
space. Above this, one gets a look at the distinctive, undulating glass roof,
through which daylight streams to cast triangular patterns on perfectly white
This central space contains a large central "well" surrounded by the centre's
three floors. On the uppermost of these, a 14-screen cinema, due to open next
autumn, will allow film-goers to take a beer, wine or cocktail to the newest
film releases as well as to reserve special "VIP" areas.
On the floor beneath this, the clothing store Timberland has turned the front of
its shop into what appears to be a large wooden box, in line with the company's
"rugged and outdoor" branding. A short distance away, Apple has finished its
unit with typical white minimalism. To one side, Softroom's "Balcony" stretches
for some 50 metres. Its futuristic, capsule-like appearance is contained within
a façade that appears to be divided into a series of wooden slats. Here, an
array of dedicated restaurants such Crocque Gascon – who will serve modern
French cuisine like "duck burger classique" – and Vietnamese street food
restaurant Pho, will serve to customers who will then sit at a shared seating
On the lowest floor, DKNY and Russell & Bromley have leased units. Gabellini's
"Village" lies to the north-east of this central space. Here, the ceiling is
shaped into soft ovals of plastic from which chandeliers hang.
Such features seem to have gone down well with retailers. At the time of
opening, Westfield says the centre will be more than 96 per cent leased. Around
90 per cent of the tenants locked into 10 to 15-year contracts before the full
extent of the current economic crisis was known. Unless the shops go out of
business, Westfield will get their money.
It may sound worrying for the retailers concerned, but signing on Lowy's dotted
line may well prove to suit them as much as Westfield. It's impossible to know
the details of each deal, but industry experts believe that they may not have to
part with any cash for the first year or two. So they can take their places in
this glittering cathedral to the future of shopping, and pay for it when (they
hope) the economy, and consumer confidence, is in an altogether better place.
And many believe that Lowy will prosper despite the current economic gloom.
"Rather than being troubled by the financial crisis, Westfield has almost landed
on its feet," says Retail Week editor Tim Danaher. "In fact, far from being
unenthusiastic about the development, retailers don't want to be left out. While
the details of the deals they have struck are mired in secrecy, Westfield, like
all developers of new shopping centres, will have made concessions – such as
rent-free periods and contributions to the shops' fit-outs, which have helped to
persuade people to come on board. While some of the smaller retailers might go
bust, the big guys won't come unstuck. Westfield has got the stomach to cope."
It has not all been plain sailing for Lowy and his empire, however. The business
news agency Bloomberg reports that the billionaire is embroiled in a bout with
tax authorities. The Australian Taxation Office is investigating claims that he
hid £42m from tax officials. A US Senate panel had alleged in July that the Lowy
family and LGT Group, a bank owned by Liechtenstein's royal family, had used a
foundation and companies registered in Delaware and the British Virgin Islands
to conceal the fact that the Lowys owned the money in question. This is
something Frank Lowy has vehemently denied.
On a more local level, the White City scheme has encountered a degree of
opposition. Nigel Kersey, director of the London branch of the Campaign to
Protect Rural England, tried unsuccessfully to take the local council to court
in 2000 for failing to ask for an environmental damage assessment over the
initial Chelsfield scheme. "Had the planning authority played by the rules, it
would have shown that the impact would be substantial," he said at the time.
Since then, Westfield says it has conducted broad consultations and that local
groups now welcome the project. Indeed, the company is so confident that it is
pressing on with plans to build a £1.45bn, 175,000sq m centre in Stratford, east
London, to be completed in time for the 2012 Olympics. "The current slowdown is
only likely to be relatively short-term compared with the planning process and
the active life of a shopping centre," says Richard Dodd, a spokesperson for the
British Retail Consortium, which represents British shopping centres. "Now, when
retailers are competing more fiercely for customers' every pound, investing in
your premises can be a good thing to do. Shopping centres offer great access and
investment in retail."
Certainly, Michael Gutman feels the company has done enough to make sure that it
is not hit by any forthcoming economic crash. "Most definitely we are in this
for the long haul," he concludes. "We have a history of being long-term owners.
We are beginning our relationship with Londoners and we hope to be embraced as a
new icon on the landscape, like Covent Garden or the O2.
"We have opened projects in recessions before and in booms before. These
buildings are built for long-term and they take several years to settle. The
retailers who have taken stores are our customers and we are in a partnership
with them to maximise their performance. The ability to effectively come in the
morning to do grocery shopping and have a coffee and maybe go to the gym and go
back home as well as doing fashion shopping surpasses anything you currently see
in the high street."
In an interview last month, Frank Lowy, Gutman's ultimate boss, divulged that a
few times a month, he plays poker. The billionaire says he gambles for stakes
high enough to be painful if he doesn't win. "It has to hurt you a little bit
when you lose," he said, declining to say how much someone with his finances
might actually bet. "And I don't like to lose, period."
This time, with the ante at £1.7bn, you can bet that losing would cause Lowy
Mega-mall: Is this
the future of shopping?, I, 23.10.2008,
a shopping basket soars
in the 'phoney' supermarket price war
12 July 2008
By James Thompson and Sam Kriss
British supermarkets have introduced massive price hikes over the past year,
shattering the myth of a so-called price war in which grocers are bending over
backwards to help hard-pressed consumers.
Tesco, Asda and Sainsbury's have ramped up the price of many products by between
22 and 32 per cent over the past 13 months, hitting customers at a time when the
cost of living is soaring, The Independent can reveal.
The soaring figures illustrate the level of food inflation heaped on consumers,
as they face spiralling petrol prices, rising utility bills and stagnating house
prices. The revelation comes at a time when grocers are as active as ever in
claiming that they are delivering millions of pounds of price cuts to consumers.
On a sample of 17 products, Sainsbury's has hiked prices by 31.6 per cent, Tesco
by 27.5 per cent and Asda by 21.6 per cent between 11 June 2007 and 11 July
2008, according to grocery price comparison site, mysupermarket.co.uk.
The Independent tracked 17 products including thick-sliced white bread (800g),
six pints of semi-skimmed milk, English butter (250g) and garden peas (1kg).
Tesco has raised the price of white bread from 54p to 72p; Sainsbury's has hiked
the price of Basmati rice (1kg) from 90p to £1.89p; and Asda has increased
English butter from 58p to 94p, as have its other two rivals.
These figures dwarf the estimates of the British Retail Consortium, which this
week said that food cost 7 per cent more in British supermarkets in June than it
did in the same month last year.
Before the last weekend in June, Tesco said it would reduce the price of 3,000
items by up to 50 per cent, while Asda promised to sell 10 staple items,
including bread, eggs and butter for only 50p until end of trading on 29 June.
However, industry experts say the current activity on price does not compare to
previous battles, and is more about PR than helping consumers.
Greg Lawless, an analyst at Blue Oar, says: "I don't think there is a price war.
This is a price skirmish. The last proper price war we had was in the early
1990s ... It's not in Tesco and Asda's interests to launch a price war as it
would suck profits out of the sector."
Retailers themselves agree. Malcolm Walker, chief executive of the frozen food
specialist Iceland, said successful retailers would not do anything to
jeopardise their profit margins. He said: "No retailer can afford to drop more
than one point – one-tenth of 1 per cent – on the gross margin and anything they
do on price is tactical." He added: "It is all marketing and spin."
Bryan Roberts, global research director at Planet Retail, made the point that
price cuts and promotions were often funded by suppliers. He said: "Effectively,
promotions cost the retailers nothing because it is the suppliers who are often
asked to invest in these 'price promotions'."
The big three grocers say that while the price of commodities, such as wheat,
meat and dairy products, have risen sharply over the past year, they try to cut
prices for products that are not affected by the same inflationary pressures.
A spokeswoman for Sainsbury's, which claimed last month that its food price
inflation was about 3 per cent, said: "The increases in the cost of commodities
such as wheat and dairy have had an impact on the price of foods." An Asda
spokeswoman said: "We disagree that supermarkets are unfairly passing on costs
A Tesco spokeswoman said: "We know customers are tightening their belts and
wherever possible we look at cutting prices to help them.
"The 7 per cent [price rise] figure from the BRC is realistic. It's easy to skew
figures by only choosing a certain basket of items for price comparison."
Cost of a shopping basket soars in the 'phoney'
supermarket price war, I, 12.7.2008,
Caught in a Wave of Bankruptcies
April 15, 2008
The New York Times
By MICHAEL BARBARO
The consumer spending slump and tightening credit markets are unleashing a
widening wave of bankruptcies in American retailing, prompting thousands of
store closings that are expected to remake suburban malls and downtown shopping
districts across the country.
Since last fall, eight mostly midsize chains — as diverse as the furniture store
Levitz and the electronics seller Sharper Image — have filed for bankruptcy
protection as they staggered under mounting debt and declining sales.
But the troubles are quickly spreading to bigger national companies, like Linens
‘n Things, the bedding and furniture retailer with 500 stores in 47 states. It
may file for bankruptcy as early as this week, according to people briefed on
Even retailers that can avoid bankruptcy are shutting down stores to preserve
cash through what could be a long economic downturn. Over the next year, Foot
Locker said it would close 140 stores, Ann Taylor will start to shutter 117, and
the jeweler Zales will close 100.
The surging cost of necessities has led to a national belt-tightening among
consumers. Figures released on Monday showed that spending on food and gasoline
is crowding out other purchases, leaving people with less to spend on furniture,
clothing and electronics. Consequently, chains specializing in those goods are
Retailing is a business with big ups and downs during the year, and retailers
rely heavily on borrowed money to finance their purchases of merchandise and
even to meet payrolls during slow periods. Yet the nation’s banks, struggling
with the growing mortgage crisis, have started to balk at extending new loans,
effectively cutting up the retail industry’s collective credit cards.
“You have the makings of a wave of significant bankruptcies,” said Al Koch, who
helped bring Kmart out of bankruptcy in 2003 as the company’s interim chief
financial officer and works at a corporate turnaround firm called AlixPartners.
“For years, no deal was too ugly to finance,” he said. “But now, nobody will
throw money at these companies.”
Because retailers rely on a broad network of suppliers, their bankruptcies are
rippling across the economy. The cash-short chains are leaving behind tens of
millions of dollars in unpaid bills to shipping companies, furniture
manufacturers, mall owners and advertising agencies. Many are unlikely to be
paid in full, spreading the economic pain.
When it filed for bankruptcy, Sharper Image owed $6.6 million to United Parcel
Service. The furniture chain Levitz owed Sealy $1.4 million.
And it is not just large companies that are absorbing the losses. When Domain,
the furniture retailer, filed for bankruptcy, it owed On Time Express, a
90-employee transportation and logistics company in Tempe, Ariz., about $30,000.
“We’ll be lucky to see pennies on the dollar, if we see anything,” said Ross
Musil, the chief financial officer of On Time Express. “It’s a big loss.”
Most of the ailing companies have filed for reorganization, not liquidation,
under the bankruptcy laws, including the furniture chain Wickes, the housewares
seller Fortunoff, Harvey Electronics and the catalog retailer Lillian Vernon.
But, in a contrast with previous recessions, many are unlikely to emerge from
bankruptcy, lawyers and industry experts said.
Changes in the federal bankruptcy code in 2005 significantly tightened deadlines
for ailing companies to restructure their businesses, offering them less leeway.
And the changes may force companies to pay suppliers before paying wages or
honoring obligations to customers, like redeeming gift cards, said Sally Henry,
a partner in the bankruptcy law practice at Skadden, Arps, Slate, Meagher & Flom
and the author of several books on bankruptcy.
As a result, she said, “it’s no longer reorganization or even liquidation for
these companies. In many cases, it’s evaporation.”
Several of the retailers that filed for Chapter 11 bankruptcy protection over
the last eight months, like the furniture sellers Bombay, Levitz and Domain,
have begun to wind down — closing stores, laying off workers and liquidating
In most cases, the collapses stemmed from a combination of factors: flawed
business strategies, a souring economy and banks’ unwillingness to issue cheap
Bombay, a chain with 360 stores, was considered a success in the furniture
world, after its sales surged from $393 million in 1999 to $596 million in 2003.
Then the chain decided to move most of its stores out of enclosed malls into
open-air shopping centers. It started a children’s furniture business, called
BombayKids. And it started carrying bigger items, like beds and upholstered
couches, with higher prices than its regular furniture.
Consumers balked at the changes, hurting Bombay’s sales and profits at the same
time that its expenses for the ambitious new strategies began to grow. The
timing was unenviable: By early 2007, the housing market began to falter, so
purchases of furniture slowed to a trickle.
The company was running out of money, but banks refused to lend more. “They did
not want to take the chance that we might not repay the loans,” Elaine D.
Crowley, the chief financial officer, said in an interview.
In September 2007, Bombay filed for bankruptcy protection. The highest bid for
the company came from liquidation firms, who quickly dismembered the 33-year-old
chain. Bombay, which once employed 3,608, now has 20 employees left. “It is very
difficult and sad,” Ms. Crowley said.
The bankruptcies are putting a spotlight on a little-discussed facet of
retailing: heavy debt.
Stores may appear to mint money by paying $2 for a T-shirt and charging $10 for
it. But because shopping is based on weather patterns and fashion trends,
retailers must pay for merchandise that may sit, unsold, on shelves for long
So chains regularly borrow large sums to cover routine expenses, like wages and
electricity bills. When sales are strong, as they typically are during the
holiday season, the debts are repaid.
Fortunoff, a jewelry and home furnishing chain in the Northeast, relied on $90
million in loans to help operate its 23 stores, using merchandise as collateral.
But by early 2008, as the housing market struggled, the chain’s profits dropped,
meaning its collateral was losing value and the amount it could borrow fell.
In better economic times, the banks might have granted Fortunoff a reprieve. But
with a recession looming, they refused, forcing it to file for bankruptcy in
February. In filings, the chain said it was “facing a liquidity crisis.”
(Fortunoff was later sold to the owner of Lord & Taylor.)
Plenty of retailers remain on strong footing. Arnold H. Aronson, the former
chief executive of Saks Fifth Avenue and a managing director at Kurt Salmon
Associates, a retail consulting firm, said the credit tightness and consumer
spending slowdown have only wiped out the “bottom tier” companies in retailing.
“This recession dealt the final blow to these chains,” he said. But several
big-name chains are looking vulnerable. Linens ’n Things, which is owned by
Apollo Management, a private equity firm, is considering a bankruptcy filing
after years of poor performance and mounting debts, though it has additional
options, people involved in the discussions said Monday.
Whether more chains file for bankruptcy or not, it will be hard to miss the
impact of the industry’s troubles in the nation’s malls.
J. C. Penney, Lowe’s and Office Depot are scaling back or delaying expansion.
Office Depot had planned to open 150 stores this year; now it will open 75.
The International Council of Shopping Centers, a trade group, estimates there
will be 5,770 store closings in 2008, up 25 percent from 2007, when there were
Charming Shoppes, which owns the women’s clothing retailers Lane Bryant and
Fashion Bug, is closing at least 150 stores. Wilsons the Leather Experts will
close 158. And Pacific Sunwear is shutting a 153-store chain called Demo.
Those decisions were made months ago, when it was unclear how long the downturn
in consumer spending might last. If March was any indication, it is nowhere near
over. Sales at stores open at least a year fell 0.5 percent, the worst
performance in 13 years, according to the shopping council.
Retailing Chains Caught
in a Wave of Bankruptcies, NYT, 15.4.2008,
Retailers Report Weak January Sales
Filed at 12:31 p.m. ET
The New York Times
By THE ASSOCIATED PRESS
(AP) -- The nation's retailers delivered more evidence of a stumbling economy
Thursday, as merchants reported their weakest January performance in nearly four
decades, extending a malaise that has deepened since the holiday shopping
The sales figures made it clear that consumers wrestling with high gas and food
prices, a slumping housing market, an escalating credit crisis and a weakening
job market retrenched further, buying mostly necessities even when redeeming
their holiday gift cards. The disappointments cut across all sectors including
discounters like Wal-Mart Stores Inc., teen retailers including Pacific Sunwear
of California Inc. and mall-based apparel chain Limited Brands Inc. Even
affluent shoppers are pulling back, hurting stores like Nordstrom Inc.
''Clearly, this is a reflection of a very difficult environment for the
consumer,'' said Ken Perkins, president of RetailMetrics LLC, a research company
in Swampscott, Mass. ''It looks like consumer spending is stalling.''
Nonetheless, shares of a number of retailers rose as many either backed their
earnings forecast or even raised guidance, signaling that they were able to
control their inventories. Hot Topic Inc. and Wal-Mart stuck with their earnings
forecast, while Pacific Sunwear, Wet Seal and Gap Inc. raised their profit
outlooks despite sales drops.
The UBS-International Council of Shopping Centers preliminary sales tally of 43
retailers rose 0.5 percent in January, well below the original 1.5 percent
forecast. The results followed an anemic 0.7 pace in December and were below
last year's same-store sales average gain of 2.1 percent. Michael P. Niemira,
chief economist, said January's performance was the weakest ever, according to
records that go back to 1970. It is based on same-store sales, or sales at
stores open at least a year.
Thursday's results extended a streak of news that showed more signs of consumer
strain. Consumers' spending accounts for two-thirds of economic activity, and
their outlays appear to have stalled from an already slowing pace seen over the
past year. Wal-Mart noted in its release Thursday that gift card redemptions
were below expectations and that customers appear to be holding gift cards
longer and ''using them more often for food and consumables rather than
While consumers have had to contend with rising gas and food prices and a
slumping housing market, there are signs that the job market is becoming a
concern as well. On Friday, the Labor Department reported that U.S. employers
sliced payrolls by 17,000, the first decline in more than four years. And on
Thursday, the department said jobless claims fell last week by 22,000, but the
decline was smaller than expected.
And while investors are hoping the Federal Reserve can avert a recession with a
series of rate cuts, some economists say the moves may be too little, too late.
Analysts also say that while the government's proposed economic stimulus
package, which offers rebate checks for more than 100 million Americans, could
help reignite spending, the lift would only be temporary.
As Perkins said, if the job market continues to deteriorate, ''all bets are
Janet Hoffman, managing partner of the North American retail division of the
consulting firm Accenture, agreed, noting she expects ''some relief'' but
''Consumers have exhausted all the avenues to get access to credit,'' she added.
Retailers are expected to offer a better picture of the impact of slower sales
when they report fourth-quarter earnings over the next few weeks. The retail
fiscal year ends in late January.
What might salvage earnings for some retailers is their efforts to control
inventories; they're also expected to pare merchandise offerings further in the
coming months to respond to slowing demand. Still, Wall Street profit
expectations have been lowered in recent weeks -- Perkins noted that
fourth-quarter earnings growth for the 130 retailers he tracks is expected to be
down 5.4 percent, compared to a 1.2 percent growth expected at the beginning of
Wal-Mart, the world's largest retailer, reported a 0.5 percent gain in
same-store sales. Analysts surveyed by Thomson Financial had expected a 2.0
percent increase. The company said it continues to do well with staples like
groceries but that home furnishings remain weak. Wal-Mart noted in its news
release that gift card redemptions were below expectations and that customers
appear to be holding gift cards longer and ''using them more often for food and
consumables rather than discretionary purchases.''
Rival Target Corp. reported a 1.1 percent decline in same-store sales in
January, worse than the 0.6 percent analysts expected.
Costco Wholesale Corp., however, reported a 7 percent gain in same-store sales,
surpassing the 6.6 percent estimate.
Within the department store sector, J.C. Penney Co. had a 1.9 percent decline in
same-store sales at its department stores, though the results were better than
the 6.3 percent Wall Street expected.
Upscale Nordstrom suffered a 6.6 percent same-store sales decline, much worse
than the 0.7 percent decrease expected. Saks Inc., which operates Saks Fifth
Avenue, said same-store sales rose 4.1 percent, better than the 2.2 percent
estimate. But in a release, the luxury retailer said shoppers continue to shift
more of their spending to sale merchandise amid a challenging economic
Macy's Inc. on Wednesday reported a 7.1 percent decline in same-store sales,
worse than the 5.9 percent decrease. The company also said it was cutting about
2,300 management jobs as the department store operator consolidates three
regional divisions and decentralizes buying to reduce costs and boost sales.
Limited Brands reported an 8 percent drop in same-store sales in January, worse
than the 6.9 percent forecast.
Gap Inc. posted a 2 percent decline in same-store sales, better than the 6.5
percent decline projected by analysts.
Among teen retailers, Abercrombie & Fitch Co. had flat same-store sales,
matching Wall Street expectations. Pacific Sunwear suffered a 7.4 percent drop
in same-store sales; analysts expected a 1.2 percent rise.
Wet Seal's January same-store sales fell 5.7 percent as its Arden B chain
continued to slump. The results were worse than the 1.5 percent decline expected
Retailers Report Weak January Sales, NYT, 7.2.2008,
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