Here is a very interesting look at the Back to School season by Margaret Webb Pressler at the Washington Post. Back to School is a difficult season for retailers because teens can be very fickle and fashion trends can appear and dissppear remarkably quickly:

It is also one season that really keeps retailers on their toes, because if there's one thing that teens seem to agree on, it's that you can't commit to a look too early.

"A lot of the kids wait to buy their school wardrobe until they get to school to see what everybody is wearing," said David Hacker, trend director for women's sportswear for J.C. Penney. "That's when they drive the volume."

...None of this research and advertising, though, can protect against that most fleeting of fashion influences: the popular teens. When kids go back to school, they may notice that a leader in their group has come up with his own idea, perhaps something picked up from a CD cover. Immediately, the followers run to the mall to try and duplicate it, marking the second wave of back-to-school shopping that all retailers wait for.

Pressler suggests there are two basic strategies for attacking the back to school market. Retailers like J.C. Penney begin researching fashion trends up to a year in advance and testing small samples of the new merchandise in the spring, hoping they've caught a fashion wave they can ride in September. Then there are reailers like Old Navy who don't want to take any chances and set out to create the fashion trend themselves:

This year for back-to-school, Old Navy is promoting rugby shirts for the whole family, complete with commercials about the "Rugby Bunch" all-American family. "We're getting behind a product that we feel our customers are going to respond to and be very comfortable with," said Jonathan Finn, director of public relations for the company.

But Old Navy doesn't just hope. The saturation ad campaign is also meant to create a de facto trend in the collective teen mind.

"If you can't get everyone in school to wear it but you can get it all over TV, maybe that'll be the influencing factor," said Cohen of NPD. "Eventually, people will say, 'I can wear that, because I've seen it.' . . . That's the logic with these barrage campaigns."

Quality over quantity. New Staples CEO has been focusing on improving existing stores instead of opening new stores:

At times during the 1990s, Stemberg's Staples was opening a new store every 48 hours. Sargent is slowing down that pace and working to nurture existing markets.

The old Staples overwhelmed customers with massive selection -- from 10 kinds of paper shredders to pens shaped like vegetables. Now stores are smaller and feature fewer items. The reasoning: Too much selection slows down the supply chain and doesn't please customers, it just stresses them out.

"When I joined the company, opening another new store was a big deal," Sargent said. "But when you're opening another one every other day, it becomes more of a machine. We entered a bunch of new markets, and we didn't do the TLC I think we should have done in those bottom 20 percent of our stores."

"There's a lot more opportunity to make our existing store network operate 5 percent better than it is to open another 100 stores," he said.

The new store formats, the targeted merchandise selection and the emphasis on customer service have vaulted Staples over Office Max and Office Depot. As with any successful retail venture, there has been one other key ingredient to succcess -- knowing exactly who your customers are and focusing on their needs:

Average customers may not be able to tell office supply stores apart, but Staples isn't targeting the average customer. Small businesses and individuals who spend more than $500 per year on office supplies account for 70 percent of sales and 90 percent of profits. Staples thinks it knows what those customers want: in-stock guarantees, solid service and short lines.

Sears is struggling (WSJ: requires subscription) to make its credit card division profitable:

Among other reasons why some analysts and investors fret: Sears's credit clientele seems more troubled than the average American. "It's one we would expect to experience more credit challenges," says James E. Moss, an analyst with Fitch Ratings. Bankruptcies among the retailer's credit-card holders soared 20% in the third quarter from year-earlier levels, and vaulted 26% more in the fourth quarter. That is far higher than the 7.8% increase recorded nationwide for personal bankruptcies in the year ended Sept. 30. Sears contends its increase is represented in dollars, not individual filers, and isn't out of line with the national statistics. (The national statistics, from administrators of the U.S. court system, come only in the number of filings, not dollar amounts.)

Sears says its customers are no less creditworthy than average Americans. The company says its active MasterCard customers have an average credit score compiled by credit specialists Fair, Isaac & Co. of 720, which roughly places them in the middle of the pack of American consumers. But Sears declines to release the scores for its inactive MasterCard accounts or for its proprietary blue card. Sears has some 60 million credit accounts, of which 25 million are active, meaning they have been used in the past year. Of those 25 million, roughly 16 million are Sears blue cards; the rest are gold MasterCards.

It is difficult to compare Sears's credit-card operations with those of rivals. Most credit-card issuers begin to write off customer accounts once they are delinquent for 180 days, but Sears doesn't take action until 240 days have passed. And at Sears, a customer who is 240 days behind can become current by making two payments, each of as little as 1/45th of the outstanding balance. Sears declines to say what percent of its accounts has undergone this so-called re-aging process.

Looks like Sears isn't ready to face up to reality yet. Which is bad news since credit represents a bigger chunk of their business than even the retail side:

Sears is the third-largest MasterCard issuer in the world, trailing behind only Citigroup Inc. and MBNA Corp., according to Nilson Report, an industry periodical in Oxnard, Calif. Sears launched the card just over two years ago, part of an attempt to counter a loss of market share by its proprietary "blue" card, which is good for use only in Sears stores. Thanks to the two cards, Sears's credit and financial-products segment provided $1.5 billion, or 60%, of the company's operating income in the fiscal year that ended Dec. 28. Its retail segment, by comparison, provided just $1.16 billion.

Saks to the rescue. Upscale department store Saks Fifth Avenue is taking an equity stake in bankrupt toy retailer FAO Schwartz and will begin selling FAO merchandise in its stores. The move makes a lot of sense:

"It's a great deal ... FAO has always positioned itself as the Tiffany's of the toy business and wanted to attract the upscale shopper, and Saks Fifth Avenue attracts that same demographic," said Jim Silver, publisher of Toy Wishes magazine.

"It also allows FAO to be in a place where people might not be thinking about toys ... A consumer is shopping for kids' clothes, and stumbles across the toy department and bingo, you have an add-on purchase."

Competing head-on with Wal-Mart and Toys R Us was a losing proposition for FAO, as they have unfortunately discovered. Instead, FAO should pursue more of these ventures that firm up its position in the upscale toy market. The alliance will help Saks as much as it helps FAO:

"One of the great challenges facing department stores is the lack of differentiation in their product mix," said Jeff Stinson, an analyst with Midwest Research. "By rolling out the FAO product, it gives Saks something unique and that's a positive for them, especially when the holiday season rolls around."

Another example of the tug-of-war between retailers and vendors, this time in the book-selling market:

The U.S. publisher of the new "Harry Potter" novel is selling some copies straight to readers. Bookstores complain that means less business for them.

Over the past couple of weeks, Scholastic Children's Books has been taking orders for "Harry Potter and the Order of the Phoenix" at school fairs around the country. Customers pay the full list price, $29.99 - far more than the cost at Amazon.com - but they also receive a free "Harry Potter" baseball hat. A portion of the proceeds goes to the schools.

The new Potter novel, the fifth in J.K. Rowling's beloved series, comes out midnight, June 21. Those ordering at the fairs can pick up their copies at local warehouses eight hours later.

Publishers have an obvious motive to sell direct: They keep more of the money. Scholastic has been selling books, including the earlier Potter works, at fairs for years. But this is the first time a Potter book has been pre-sold, offered before publication.

This Wall Street Journal article (subscription required) does a quick scan of Wal-Mart's weaknesses:

Wal-Mart is, without question, a fabulously run company. It has, however, but one selling proposition: price. While that's a pretty good one, the company isn't infallible. Same-store sales have been inching down, to the low single-digits. Costco Wholesale, among others, has effectively competed on price, while offering higher-quality goods.

Wal-Mart's store locations aren't always the most convenient. The stores can be dark, hard to navigate and not pristine. The lines are long. The apparel is far from hip.

A funny and insightful story in the Washington Post explores how men shop differently than women. While most women see shopping as gathering, men see it as hunting. The reason, author Margaret Webb Pressler suggests, is that men are uncomfortable with fashion trends and afraid they will make the wrong decision. (Hence the popularity of "we'll make sure you look like everyone else retailers Gap and Banana Republic). This has lead to an interesting phenomenon: women shopping for men's clothes:

So if fashion's not in your comfort zone, why would you want to prolong the experience? The speed requirement many men have seems to be a macho response to a generally uncomfortable situation.

Shopping so little only reinforces a lack of confidence, too, so that even the most accomplished, professional customers can be wary about making a fashion decision on their own.

"We have one power attorney who comes in with his wife, looks in the mirror and says, 'How do I like this?' " said Alan Shemer, one of three partners at the Boardroom Ltd., a men's tailored-clothing store at White Flint Mall.

In fact, men's clothing stores say the majority of their customers shop with their wives or girlfriends. And that's actually great for business, because women automatically head to something more upfashion. They aren't so rushed, either: While the man is in the fitting room getting the same old blue blazer chalked up by the tailor, a woman will often browse through merchandise and come up with a fresh idea or two.

The role of wives and girlfriends is getting even bigger, too, as workplace dress codes get more relaxed and suits are replaced in many companies by "business casual" attire. Retail executives say men have had a difficult time finding a style they're comfortable with in this new milieu, much less one that feels appropriate. Although most suits are bought by men, most men's casual clothes are bought by women.

There you have it. If you are a retailer of men's clothing, find a way to attract women to your store. Perhaps you could offer $10 gift certificates to all certified wives or girlfriends.

Blockbuster is struggling to reinvent itself as an entertainment retailer, emphasizing (WSJ: requires subscription) sales instead of just rentals.

Last year, in a major shift, people spent significantly more on movie purchases than rentals. While retail sales for films rose 19% to $12.26 billion, rental spending slipped 3%, to $9.92 billion, according to Adams Media Research of Carmel, Calif. And in December Blockbuster's stock plunged 32% after the company disclosed that its fourth-quarter revenue would be weaker than expected, which it blamed on consumers snapping up low-priced DVDs and videos at discount retailers.
Now the 53-year-old Mr. Antioco, who took over Blockbuster in 1997, is steering the company into the retail market -- and onto a risky collision course with discount chains such as Wal-Mart Stores Inc., Target Corp. and Costco Corp. A bit player with only a 3% share in video sales, Blockbuster hopes to triple that share by 2006.

...Mr. Antioco last summer announced plans to plunge Blockbuster into the retail market. It revamped store layouts: Instead of scattering shelves of movies for sale throughout the store, it grouped the shelves together under huge "Buy This" signs hanging from the ceiling. Used tapes and discs, called "pre-viewed," were put in separate racks from new movies.

To ensure that customers can't miss the products for sale, stores are arranged to steer them past racks of for-sale product before they get to the rental wall that usually runs along the perimeter. Blockbuster has also created similar zones dedicated to selling video games.

Blcokbuster's predicament did not come about accidentally. As it's market share grew to 40% it exerted significant bargaining power over the studios which looked for a way to strike back:

Worried they had become too dependent on Blockbuster, some studios cut prices on DVDs in the hope that a thriving retail market would weaken Blockbuster, whose expertise was in rentals. Last year, Warren Lieberfarb, then chief of home video for AOL Time Warner Inc.'s Warner Bros., complained that Blockbuster had used its market share "to increase their margins at the expense of the studios." Mr. Lieberfarb, who left Warner in December, led a drive to offer cheap DVDs to train the public to buy rather than rent them and, he says, to create "an antidote to Blockbuster's dominance" without hurting the studio's profits.

We've seen this kind of tug-of-ware before (for example, Nike vs. Footlocker) between vendors and retailers that get too powerful. Becoming the market leader brings its own set of new risks and challenges.

The Wal-Mart juggernaut. Wal-Mart is targeting yet another industry with fat margins: personal computers. Sam's club is offering $299 PCs running Red Hat Linux while Wal-Mart is offering $199 PCs powered by Lindows Linux. Nobody thought Wal-Mart would move into groceries or PCs. If you're not already competing with Wal-Mart, you will be soon. Nobody is safe.

Home Depot is expanding into rural areas as it encounters saturated metropolitan markets and fierce competition from Lowe's. The home improvement retailer is mining zip-code data from its customer database to plan locations for the new stores:

The couple's next visit to a Home Depot may not be so miserable. That is because the company will soon open a 118,000-square-foot store here, just 10 minutes from their home. Avon was chosen, in part, by using ZIP code data from its stores' sales receipts to track long-distance customers like the Campbells. Based on that information, Home Depot, which is based in Atlanta, will also open two other stores in rural Colorado in the next three months.

However, unlike Wal-Mart and Lowe's, Home Depot is not well position to go after rural markets:

Mr. Szymanski, for one, says store managers in rural areas will need extra latitude to tailor their inventories and services to local customers. Because management has moved to centralize buying decisions in Atlanta, he said, "it's going to be very difficult to go into these smaller markets and have the micro perspective to figure out who these people are and how to satisfy them."

Others note that Lowe's and Wal-Mart began in rural areas and have long employed large regional distribution centers to serve their stores, but that Home Depot stores receive most of their goods directly from individual vendors.

"It's a real disadvantage," said Aram H. Rubinson, a retail industry analyst with Banc of America Securities, who gives Home Depot's shares a neutral rating. "You become a slave to the vendors' shipping schedules and minimum order requirements, not to mention the fact that the freight charges are more expensive."

Michaels is another retailer benefiting from the nesting trend among jittery Americans.

Teen jewelry retailer Claire's reported strong sales growth. Further evidece that specialty retailers focused on a niche market are thriving in the midst of a downturn. Of course, as the article points out, inventory control and cost management help a lot.

Reebok is staging a comeback and fighting to gain market share from Nike. Reebok is riding a trend away from high-priced sneakers and is also capitalizing on the reemergence of the retro look:

In February 2002, Foot Locker told Nike the store wanted to reduce the number of Nike's marquee shoes — the Air Jordans, Shox and Air Force Ones going for more than $100 — because it believed that consumers were turning more to midprice shoes. According to a person close to the deal, Foot Locker told Nike it wanted to reduce its marquee shoes from 12 percent of the chain's business to 6 percent, and canceled $150 million in Nike orders.

Nike struck back. Nike denied that it had pulled back on existing orders or punished Foot Locker with late shipments, as had been reported. "But Foot Locker will no longer be a primary distribution for marquee and launch products," said Charles Denson, the president of Nike Brand, in a December call with analysts.

On Feb. 15, Nike's Hall of Hoops displays in Foot Locker stores were replaced by Reebok's Above the Rim, featuring RBK shoes and jerseys and hats endorsed by Allen Iverson, the Philadelphia 76ers star. Reebok has also filled the vacuum with more of its Classic line, part of the retro look that has been successful for such sneaker also-rans as Converse and Puma.

"They jumped on the retro trend, with sneakers like those sold 10 to 20 years ago — the youth of today haven't seen them," said Matthew D. Serra, the chief executive of Foot Locker. "Retro is very hot, and Reeboks are very affordable: $60, $70 for most of them. We put them in, and the customers responded." (Mr. Serra refused to give sales figures, or to discuss l'affaire Nike.)

On the other hand, here's a story (WSJ: requires subscription) that shows that cutting-edge technology is not always what it's cracked-up to be:

Kmart Corp. wants to cancel leases on hundreds of its self-checkout machines because the systems cost too much to maintain and increase the risk of theft, the retailer says.

Kmart, of Troy, Mich., said the technology, which allows customers to buy merchandise without the help of an employee, may not have any place in its stores after the troubled retailer emerges from bankruptcy...

The story mentions that the technology in the self-checkout machines Kmart is using requires a lot of maintenance, so this is probably not the best test of where this technology is headed. Home Depot has deployed self-checkout machines. Then again, Home Depot is suffering from poor customer service.

Ultimately, retailers will have to weight the convenience of these machines vs. the impact on customer happines just as they currently weigh the savings in labor costs vs the higher incidents of shoplifting. (The adoption of smart tags will make shoplifting harder and make the adoption of this kind of self-checkout technology easier).

The adoption of RFIDs or smart tags just took a giant leap forward. Benetton has announced that it will start using RFIDs in the Sisley line of clothing it sells through its 5,000 stores world wide. Phillips has prepared 15 million smart tags for Benetton to use:

Phillips says its smart tags will be imperceptible to the wearer. They store information on the style, size and color of the garment and its path through the manufacturing and stock chain, said Karsten Ottenberg, senior vice president of Philips Semiconductors, based in Hamburg, Germany.

Because the ID is embedded in the clothes — it's an antenna-bearing chip smaller than a grain of rice that's attached to the clothes' labels — any item returned to the store automatically re-enters the inventory.

Since the chips contain no power source they can only transmit their data when within 3 feet of a receiver — either a handheld unit or a shelving monitor in a Benetton store or warehouse, Ottenberg said.

The ID tags have the capacity to store and release more information — although Ottenberg cautioned that the chips will store no data about the customer, and will be essentially useless after the garments leave the store.

Smart tags could potentially be used even after the sale is made -- if and when privacy concerns and technological obstacles are overcome:

For instance, a sales clerk might be tipped that a person in a pair of RFID-tagged slacks is a frequent customer. The salesperson could give that customer priority, and make sales suggestions based on the company's idea of clothes that match the slacks, Zwibel said.

Such scenarios could lead to protests over "spy clothes" on privacy grounds, said Wayne Madsen of the Electronic Privacy Information Center...

But the RFID tags could be programmed for other short-range tasks, like "talking" to a forthcoming Whirlpool washing machine to alert it to proper washing instructions, Zwibel said.

Retailing is about to get a lot more interesting.

Salon has an amusing, though heavy on the philosophy, account of buying customized jeans at Levi's. By writing a phrase in rhinestone or having an artist design and paint your jeans, Levi's is getting away with charging $500 per pair.

Like so many other fashion trens, it started in Asia:

"I was in Japan at a popular upper-end boutique called 45 RPM, and I noticed a sewing machine in their store," says Burbano. "I knew right then that customization was going to be the way the market would go."

Although the idea has always been around:

"We're just recycling the ideas of the past," says Burbano. "In the '60s, girls would shrink their jeans in their tubs at home. This was the first instance of customization. People have always used jeans as their own personal canvas." The personification of this idea was of course snaking up the stairwell behind her back as we talked. "We just took it to another level."

Customization makes a product unique. And if a product is unique, you can charge more for it:

"Customizing a good automatically turns it into a service, and customizing a service automatically turns it into an experience -- a memorable event that engages a customer in an inherently personal way," state Pine and Gilmore in "Markets of One." In this way, mass customization becomes one of the most desirable strategies for businesses in the face of the mass-produced backlash for both the growths in service-related jobs and consumer satisfaction.

Sell merchandise no one else sells and you can set your own prices.

Book stores are bracing for lower sales if there is a war:

Publishers and book retailers are nervously calculating the effect of a war in Iraq, worrying about lost promotional time and lost revenue. Book publishing is almost entirely dependent on the free publicity that authors receive in newspapers and on television and radio. On important programs, the time devoted to entertainment features will shrink considerably if a war occurs.

The most sophisticated retailers are the ones that are best able to anticipate "events" like war, bad weather (or even having the sidewalk in front of your store repaired); change their strategy in time to cope with the event; and, perhaps most importantly, be able to "remember" (i.e. record) what the impact of a give event is on its sales and which strategies did or did not work.

Staples is reinventing its image as a place that is easy to shop at:

"Our job is getting people to drive by Office Depot and OfficeMax and go to Staples instead," said John Karlson, senior vice president for strategic development at Martin/Williams. "The way to do that is by making it easier to get through the store, within the format of the large superstore."

"That was the `ta-dah' we discovered after probing the psyches of the target audience," he added. "We found that a lot of people don't enjoy shopping for office products."

Staples has been the first of the three office superstores to understand that a large merchandise selection is no longer enough to attract customers. Remember, your stores have to be a place that customers want to be.

Whoever thought competing against Sam's Club and Costco would be easy? BJ's Wholesale Club once did and is now learning otherwise:

Just over two years ago, executives at BJ's Wholesale Club Inc. were talking about taking the company on a nationwide expansion trip, setting up stores slowly but surely from sea to sea over the next decade.

Now, company officials instead speak of improving the BJ's already in business and refocusing on its East Coast foothold.

That's what happens after retail competition intensifies, shoppers bargain hunt, profits fall, stock prices plunge and upbeat earnings outlooks turn into grim forecasts.

BJ's is still struggling to figure out who it wants to sell to and what makes them different. The problem is summed up in this insightful quote:

"It seems that, unfortunately, the most success in retail is from proactive strategies, rather than reactive," said Michael Tesler, president of Retail Concepts in Norwell. "And this feels like a reactive strategy."

Circuit City, in an effort to lower fixed costs, recently announced it was laying off 2,000 salespeople and eliminating commission-based pay. Salespeople will now only be paid an hourly rate. The move comes as Circuit City continues to lose ground to Best Buy. Eliminating commissions strikes me as a risky move. This will be an important story to watch.

I was at a Bed, Bath & Beyond over the weekend shopping for a shower rack when I noticed that at the checkouut counter they were selling copies of the Harry Potter books. This brought to mind an important trend that I've mentioned before and appears to be growing: the boundaries between categories of retailers is blurring. Retailers are increasingly stocking select items that go beyond their focus. This means that these days your competition is everywhere. If you are a small book-store, you are not only competing with the big chains like Barnes & Noble and Borders, you are also competing against stores you may not even imagine are selling what you sell.

Notice that Bed, Bath & Beyond stocked the Harry Potter books, one of the best-selling set of books in recent times. They were also selling Atkins for Life, another blockbuster. Of course they did not stock books that might sell well. They are only stocking a handful of books, but they are the books they know will sell, the kind of books that are supposed to drive customers into your book store. The low-hanging fruit, leaving you to sell the occassional copy of Dickens or Dostoevsky. The competition is getting fiercer, but you don't need me to tell you that, do you?

What can you do? Cultivate customer loyalty among your big-spenders. Make your store a place to be, not just a place that carries merchandise. And, if you can get away with it, perhaps you can discreetly stock a few best-sellers that are outside of your focus area. A $20 bill is the same whether your customer is buying a Harry Potter book or vanilla-scented candles (to improve the reading ambience, of course).

A nice review of some time-honored principles of marketing. Some excerpts:

Furniture salesmen in white coats with clipboards selling mattresses -- brilliant use of this concept. Better yet, a computer analysis of your "sleep comfort number." The computer does not lie -- the $5,000 mattress recommended by the computer is the one for you! The salesman is taken out of the process. Brilliant.

The home service company that shows up at your door with a clean van and a clean service technician are also practicing this marketing method. The sharply dressed tailor/salesman in the men's clothing store is perceived as an expert clothier and fashion watcher. Notice that he always recommends a few nice shirts to go with those two suits?

Legitimate authority can position your company at the top of your prospects' mind and they will not question your expertise.

Apparel retailers TJ Maxx and Marshall's are citing the severe winter weather for lower sales, saying:

"However, sales were negatively affected by periods of heavy snow and rain in the Northeast," Wedge added. Consumers had no incentive to buy spring fashions like micro mini skirts in the frigid cold, analysts said.

If after two months of record-breaking low-temperatures these guys were still hoping to sell micro-mini skirts, it's time they adopted more flexible purchasing policies. The smart retailer needs to always be making adjustments to the merchandise she is stocking, to stay in line with sales trends (and anticipated sales trends). Those retailers who make purchasing decisions months in advance and are not flexible enough to make adjustments will lose out to more nimble competitors.

Fabrics retailer Jo-Ann is riding a "nesting" trend among Americans who wary of possible terrorist attacks and are spending more time at home.