Agape in the aisle

It all became clear in an interview a few years back with a man named Sherwood Schwartz, the television producer who created the dubious passel of 1970s-era comedy shows like Gilligan’s Island, Beverly Hillbillies, and the Brady Bunch, among others. The interviewer asked him to explain why every one of his shows always began with an expository theme song---a song that would explain in vivid detail the premise of the show (“So this is the tale of the castaways….” and “Come and listen to my story ‘bout a man named Jed….” and “Here’s the story of a lovely lady…”). Schwartz said he believed this was the essential week-in-and-week-out ingredient to the success of his television comedies because, as he put it, “the puzzled cannot laugh.”

Cut to the aisle of your local supermarket. We use video systems to capture and code shopper styles and behaviors in retail stores. This lets us see thousands of repeated behaviors, many of them eye-opening to ourselves and our clients. But whether the study is about diapers, dog food or analgesics, we too often see a hidden segment of shoppers perhaps best described as “the puzzled.” These shoppers stand perfectly still. They stare at the shelf and—I’m not kidding—their mouths are usually open. When it seems like divine Providence will not explode off the shelf to help them find the brand answer they seem to be looking for, the following sequence usually takes place: they reach for a product, they heft it, they turn it over in their hands, they return it to the shelf, they reach for a competitive brand and go through the same “heft, read and regard” routine before putting it back. Then they walk away, shaking their heads ever so slightly (this is one of the reasons we also do intercepts—a way to learn what that whole last bit was all about.)

Obviously marketers need to make sure they’re not losing sales because something about the product or the package or the brand is causing head-scratching in the aisle. But it’s never a bad idea to apply the Schwartz Admonition to the point of sale because of a truth we’ve documented too many times: the puzzled cannot buy.

Fiddling while commuters rush by

A young musician is in a Washington DC metro station. He wears jeans, a long sleeved T-shirt and a Washington Nationals baseball cap. It’s Friday morning. A violin is in his hand. The case is open at his feet. A few coins and dollar bills are inside as seed money to stimulate contribution. At 7:50 am, he begins playing. He continues for 43 minutes. During this time, he plays through six classical pieces, including the stunning Bach Partita in D minor. His music resonates through the entire metro arcade.

About a thousand people pass by. Almost all ignore him. Twenty three of them glance momentarily and wait. Seven people stop to listen for more than a minute. He collects a total of $32.17.

The violinist is Joshua Bell. He is one of the great musical virtuosos of our time. He sells out concert halls. He plays to capacity audiences all over the world . Now, here he is, in the Washington Metro, playing an 18th century Stradivarius violin, and just seven people stop to listen for more than a minute. (Interestingly, according to Washington Post reporter Gene Weingarten, who concocted this Pulitzer-prize winning experiment, every time children walked by the performance, they tried to stop and listen. And each time, a parent swooped them up and kept walking.)

What does this experiment show us? It depends on your perspective. Are we too busy to appreciate beauty? Was Bell just a bad busker?

One lesson to draw from the story is how much we can learn from well-designed, rigorous real-world experiments. When the reporter first proposed the experiment, he anticipated that the music would draw a throng, perhaps even create problems with crowd control. Instead, he learned that only a very few classical music fans (and children) would stop to enjoy the music. No focus group or interview would have provided the same insight. More importantly, the experiment demonstrates the central role of context in generating a reaction, whether it’s a crowd of commuters or shoppers. Humans have a hard time assessing product quality on its own merits; rather, the environment powerfully shapes decision making. Imagine if someone were to set out a cheap folding table in downtown Chicago displaying piles beautiful couture shirts with a hand-lettered sign selling them for $10. Most likely, people would ignore the display on their way to Macy’s or Nordstrom, because there would be no cues, such as designer labels, admiring sales associates, or piped in classical music, alerting them that these shirts were in fact valuable. For stores, carefully designed research could help figure out what in the environment causes shoppers to line up and what makes them walk on by.

Back to the hedonic treadmill?

What happens now that Fed chairman Ben Bernanke has officially declared the recession “ likely over?” Consumer spending, still sluggish, is finally on the rise. Nobody is yet breaking out the champagne – and as bloggers and cartoonists among others have warned, the economy won’t truly rebound until jobs return, and right now it’s still not a pretty picture. But is a new frugality here to stay, or will we soon return to some of our old ways? It may depend on your rung on the ladder. While working stiffs grabbed private label bread and took staycations, the rich curtailed their purchases of fine art and sold off the private jets. Sure, the recession slammed the fortunes of rich and poor alike – Bill Gates is out $3 billion -- but the families who had $20 million before the recession and then found their assets depleted to $14 million were never in jeopardy of going hungry. To some extent, the wealthy went on a time-limited spending diet because of a jarring hit to their balance sheet, and because for at least a while it appeared unseemly to flaunt lavish purchases when so many people had fallen on hard times.

But here’s a truism which bears repeating: the rich can only hold out for so long. They really do need, or at least, really, really want what others may call non-essentials , like couture, art, and second homes. Once the stigma lessens, as Michael Silverstein of the Boston Consulting Group says, “…the rich will realize they're rich again and start to spend.” According to the 2009 Mendelsohn Affluent Survey, nearly a third of wealthy households purchased fine jewelry and a fifth purchased artwork or collectibles in the past year. As the recession slowly begins to thaw, the rich are very likely to go back to their old acquisitive ways, driving the recovery further and faster.

Luxury brands are salivating at the prospect they can woo affluent shoppers as they trickle back into the store. MarketWatch reports that at the Saks Fifth Avenue flagship store, the personal-shopping service area is ready and waiting and lavishly appointed with stunning views. In addition, the store is limiting stock and focusing on exclusive brands and lines. High-end brands are also focusing on offering top-notch quality and design; for example, Restoration Hardware has hiked prices 20 to 30 percent to distinguish its offerings from its lower-quality competitors. Exclusivity and great design have also kept Louis Vuitton and Hermes growing impressively, even during the recession. Some luxury retailers are toning down the flash a little, such as Fabergé, which has launched an online venture to allow shoppers to participate in “inconspicuous consumption.” While some have criticized these attempts to lure back the luxury market with high prices, exclusivity, quality, and discretion, we think they just might be enough to get the rich spending again.

Any chance the well-heeled are going to help spend us out of our troubles?

Reports of Sears’ death slightly exaggerated (for now)

Not many people are seeing the softer side of Sears these days, or the harder side for that matter. Tech Ticker reports that Jeff Matthews of hedge fund RAM Partners says the much anticipated Sears turnaround story may never happen because Sears Holding Corp. Chairman Edward Lampert doesn’t know how to run retail. Barron’s recently ran a story pointing out Sears’ many problems -- sagging sales, shabby stores, inattentive service, uncompetitive pricing – and suggesting the company’s stock price could fall another 50%. Beyond frightening. Credit Suisse analyst Gary Balter wrote an earnings note titled, “Put A Fork In It.”

Are the naysayers right? Is Sears done?

Sears has certainly gotten close to the max in cutting costs – there have been reports of only one sales associate per floor. In a world with where national big box stores provide competitively priced appliances on the one hand, and local dealers lavish personal attention and customer service on the other, Sears needs to be competitive on some dimension to survive, since there’s no net over the abyss of the middle.

Sears could focus on a smart reinvention its stores. The company still has some fabulously reputable brands, like Kenmore, DieHard, Craftsman, and Land’s End. Sears has actually made a number of good decisions lately – a plan to start selling toys and to offer a Christmas Club card, where consumers add value beforehand and get a 3% bonus on the funds. This has some old-fashioned, Big Book Catalog-style appeal. On the 21st century front, Sears’ MyGofer experiment, which merges online shopping and the ability to pick items up at a brick and mortar location, might allow Sears to unlock some value of all those Sears and Kmart stores. (But note to Sears: if you’re going to position yourself as a serious Internet player, make sure pranksters can’t rewrite your content and punk the living daylights out of you.)

It’s always hard to see around corners, but it’s an interesting question to ponder: what would a successful Sears look like in five years?

Shhh… Abercrombie is Cutting Prices

Last night at the mall, we saw what it looks like when retailers who don’t want to discount do the dirty deed in hushed tones. Just a few feet inside the lease line at an Abercrombie & Fitch store, we saw fleece tops at 50% off—a whacked price put onto a tasteful little sign no bigger than a postcard. We saw this throughout the store, motivating price points on merchandise clearly meant for the upcoming fall/winter season. This A&F store even had a sign at the entry announcing a back-to-school sale (odd, since prime back-to-school shopping season is behind us). Deep discounts? On current season merchandise? Is this really “we will not become promotional” A&F? Since the onset of the recession, shoppers have flocked to low-price retailers like T.J. Maxx and Ross. Nearly every clothing chain has aggressively discounted to try to win over penny-pinching shoppers. But in the face of all this discounting, A&F has stubbornly held onto its loftier price structure to protect its “aspirational” brand.

Last week, A&F announced that its sales dove a frightening 29 percent in August – the eleventh straight month of double digit sales declines for the retailer. Sure, times are tough and the teen (and parent) clothing budget has been squeezed, but rival Aeropostale, with its less expensive, but still fashionable, apparel managed to increase sales a very respectable 9%. A&F has finally, reluctantly, quietly capitulated to shoppers’ demand for a deal (while still clinging hopefully to the idea of an aspirational brand). “It (discounting) is not the primary vehicle nor will it be the primary vehicle for driving business, but it is part of the balance at this point… but it is not the driving force of this business. The driving force is fashion, quality, aspiration, and will continue to be so,” Chief Executive Officer Michael Jeffries said on an Aug. 14 conference call.

A&F may have done its job of creating a high-priced brand image a little too well. Despite a current move to more price cutting, the company’s success ultimately depends on the willingness of teens to drop $50 on “Perfect Butt” sweatpants once the economy rebounds. Still, now that teens have learned that for the same $50 they can get a pair of sweats and jeans at Aeropostale and still have money in their pocket for a couple of tickets to a movie, it may not be so simple to get them to return. Habituation is a tough monkey to overcome.

Sara Lee’s bread is making less dough

Somebody doesn’t like Sara Lee. It almost seems unfair. After finally recovering from the low carb diet craze of the 90s, the company is feeling the squeeze from private label, especially in the bread aisle. Thanks to the recession, customers are shunning name brand loaves (and cakes) in favor of cheaper private label starches in order to stretch their grocery budget. Sara Lee must also compete with price-slashing name brand rivals.

Not to pick on Sara Lee – other packaged-food companies are getting pinched – but you have to wonder whether Sara Lee fully understands the customer motivations and behaviors played out at the shelf that might be causing sales to plunge. The company knows profits are down, but competitors Kraft and Kellogg are turning in respectable numbers as shoppers trade takeout for meals at home. Does Sara Lee know why buyers are reaching for the doughy store brand whole wheat instead of Sara Lee’s innovative Soft & Smooth loaf? Does the company understand on a volumetric basis those who have come to the store fully intending to buy the brand, but then bail in the swirl of the last three feet? And why they bail? Is it price, promotion, packaging or an intriguing blend of yes to all that? Or maybe is it some other lure or allure?

Sales are an important, obvious, but crude measure of how shoppers interact with brands. If companies hope to stop the slide toward private label, they need to be where the in-the-moment calculations of the shopper occur. They need to take hold of the in-aisle thinking of shoppers who buy the brand, don’t buy it, and most tellingly, the ones who intended to do so and then decided in favor of another.

Gilly Hicks – We’re Not Sold

When it comes to Gilly Hicks, the lifestyle lingerie emporium aimed at teens and the newest brand in the Abercrombie stable, there’s one thing we can all agree on: the store itself is beautiful, luxurious, and sexy. The look of the space has won raves from fashion bloggers and stock analysts alike. The branding is brilliant, although entirely fictional: Abercrombie CEO Mike Jeffries concocted an elaborate Australian back story for the entirely American underwear brand (who knew “down under” had other meanings?) A portrait of “Gilly” hangs in the stores, to add a faux vintage feel to the shop. Gilly Hicks hopes to be younger and hipper than, but just as successful as, Victoria’s Secret.

The opening of Gilly Hicks has been controversial. Although Citigroup analyst Kimberly C. Greenberger praised the store’s “cute and sweetly sexy” image and said, “We believe Gilly Hicks could be a more wholesome alternative (to Victoria's Secret), and mothers would not mind taking their 15-year-olds to Gilly Hicks to shop,” an assortment of critics have attacked the whole notion of trying to sell sex to teens. Everything from the store’s racy ad campaign, featuring 7-foot-tall posters of naked men, to the website, which broadcasts a video showing women swimming topless, and the effort to sell sexy lingerie to teens has drawn complaints.

But the ultimate question, indeed, the only question is, will it sell? Gilly Hicks represents a huge per store investment, from the home-like front porch exterior to the dimly lit Ralph Lauren-on-steroids interior, with a huge amount of square footage dedicated to selling a tiny passel of products that would fit comfortably inside the closet of a New York City studio apartment. On the one hand, other companies have made big profits using edgy, sexy ads to sell to the teenage set. The other companies in Abercrombie’s stable, Abercrombie & Fitch, abercrombie, and Hollister, have deftly won over their target markets. Unfortunately for Abercrombie, we think it’s highly doubtful that Gilly Hicks is going to help the company bust out of a recession-fueled slump, despite the store’s gorgeous environment. Luxury undergarments for teens are not a natural sell in the best of times, and right now, the retailers that are thriving are mostly value brands aimed at the prudent. Add in the store’s sales crew – the young-side-of-20-something associates look as great as the store, but are without the years of experience in fitting bras and selling intimate wear – and it seems like an even bigger, and more expensive, misstep. What do you think?