Shop Talk

Check Out Line: Retailers need to step up the sucking up to consumers

Check out an American Express survey that shows that quality service matters more than ever, suggesting U.S. retailers may want to start sucking up to recession-wary consumers even more.      Sixty-one percent of Americans polled said quality customer service is more important in today’s tough economy and that they will spend an average of 9 percent more when they think a company is providing that. Important points when some analysts and investors worry the economy may be at risk of dipping back into recession.      In a disconnect, however, many businesses seem to be missing the message as 28 percent of those polled believe that companies are paying less attention to good service and 27 percent have not changed their attitudes, according to the American Express Global Customer Service Barometer (which sounds like a weather vane for customer service).   “Customers want and expect superior service,” AmEx executive vice president Jim Bush said in a statement. “Especially in this tight economic environment, consumers are focused on getting good value for their money. ”       “Many consumers say companies haven’t done enough to improve their approach to service in this economy, and yet it’s clear they’re willing to spend more with those that deliver excellent service – suggesting substantial growth opportunities for businesses that get customer service right,” he added.

Retailers might want to keep all that in mind given the fact that June same-store sales came in slightly below expectations and some analysts see the sector treading water.      The survey was conducted in the United States and 11 other countries.   In the United States, nine in 10 of those surveyed consider the level of service important when deciding to do business with a company, the survey said. However, only 24 percent believe companies value their business and will go the extra mile to keep it.      Contrary to “conventional wisdom,” the survey showed more are inclined to talk about a positive experience (75 percent) than complain about a negative one (59 percent).      And consumers said they are far more likely to give a company offering good service repeat business (81 percent) than they are to never do business with a company again after a poor experience (52 percent), according to the poll.      However, negative feedback online weighs more heavily as almost half of consumers gather others’ opinions about a company’s customer service reputation and they put greater credence in negative reviews (57 percent) versus positive ones (48 percent), according to AmEx.      “Because consumers can broadcast their views so widely online, each and every service interaction a company has with its customers becomes even more crucial,” Bush said. “Developing relationships with customers, listening to them, anticipating their needs, and resolving any issues quickly and courteously can help make the difference.”      In fact, 81 percent of Americans have decided never to do business with a company again because of poor customer service in the past, the poll said. Half of those surveyed said it takes two poor service experiences before they stop doing business with a company.      However, 86 percent will give a company a second chance after a bad experience if they have historically had great service before, according to the poll.      Woe to those who screw the experience up too, as 52 percent of consumers expect something in return after poor service beyond just resolving the problem. Seventy percent want an apology or some form of reimbursement.      So retailers, I expect red carpet treatment and a lot of sucking up this recession or you won’t get any of my limited funds!

Also in the basket:

Chrysler launches money-back guarantee

Hain Celestial to name two Icahn nominees to board

Study: Living Near Restaurants Makes You Fat (Wall Street Journal)

Industry Places Bets on back-to-School (WWD, subscription required)

Check Out Line: Borders launches e-bookstore … finally

Check out Borders Group finally launching its e-bookstore.

The No. 2 U.S. bookstore chain’s electronic bookstore comes nine months after rival Barnes & Noble debuted its Nook e-reader and three months after Apple introduced its popular iPad tablet computer, allowing both companies, and Amazon.com, which sells the Kindle e-reader, to get a head start.

No worries, says Borders, which saw sales at its namesake superstores open at least a year and on its website fall 11.4 percent in the first quarter.

“We’ll take market share just by turning it on,” said Mike Edwards, president of Borders Inc, the company’s main operating business.

Edwards said Borders had data and email addresses for the 38 million customers in its loyalty program and about 700 stores at which to promote its virtual bookstore, which will help it catch up. The company’s goal is to secure a 17 percent share of the e-book market by July 2011.

“A lot of people have said, ‘You’re kind of late to the game,’ and I’m saying, ‘the game actually just started,’” Edwards said.

However, larger rival Barnes & Noble recently said it has already won 20 percent of the U.S. e-books market since launching Nook, exceeding its share of the physical book market.

Check Out Line: Enjoy the higher U.S. retail sales for now

Check out expectations for June sales. They look pretty good. Analysts expect a 3.3 percent increase in June, according to Thomson Reuters data.

Of course, that excludes Walmart, Best Buy and a slew of other major retailers that do not report monthly sales. It also comes off of a 4.9 percent drop a year earlier.

The later point is where things start to get worrisome. Later this year, comparisons turn tougher. That will come just in time for the key holiday selling season.

Recent economic data, like last week’s June employment report, show the economy continues to be sluggish, if not headed for a double dip into recession. So while the sales data are expected to show the 10th consecutive month of rising sales, the data likely mask underlying weakness.

“The fundamentals are just not adding up to a recovery,” Bryan Eshelman, managing director of AlixParners retail practice, said, referring to weakness in key indicators of economic strength like private sector employment.

Also in the basket:

Walgreen June same-store sales up 2 pct

Check Out Line: June jobs data disappoint

Check out the latest batch of grim data about the U.S. job market.

U.S. employment fell for the first time this year in June, renewing concerns about the strength of the U.S. economic recovery.

Weaker-than-expected private hiring and the end of thousands of temporary census jobs translated into a decline of 125,000 nonfarm payrolls, their largest fall since last October.

Analysts polled by Reuters had expected employment to fall 110,000 last month.

Private employment, often regarded as a better gauge of labor market health, rose only 83,000 in June, below market expectations for a 112,000 gain.

Retailers, wrestling with high labor costs and cautious American consumers, also seem to be playing safe while seeking new employees. Retail hiring fell 6,600 in June.

Also in the basket: Blockbuster wins debt reprieve, forced to delist

Pampers to create designer diapers

Following a trend made popular by teen shops H&M and Forever21, a Procter & Gamble brand is making the leap to disposable fashion.

Literally.

Fashion designer Cynthia Rowley will create a line of Pampers diapers for Target that will include madras, stripes and ruffles, P&G said Wednesday. The collection “delivers the perfect blend of utility and aesthetics,” according to the company.

“It’s the first piece of clothing your baby will ever wear, and it should be special,” said Rowley, who designs clothing and accessories for several department stores and has appeared on “Project Runway.”

The new Pampers by Cynthia Rowley, available in 11 different styles, go on sale in mid-July.

Some parents like to frame their children’s smock dresses or save their first pair of shoes. Wonder what they’ll do with baby’s first … well, maybe we’d rather not know.

Check Out Line: Beware the ides of rising costs for food companies

Check out fears of rising costs for U.S. food companies.

Rising commodity costs and promotional discounts are pressuring profit margins for food companies and analysts said more may be on the horizon.

General Mills, whose brands include Cheerios, Green Giant and Haagen-Dasz, said on Tuesday that the gross margin in its most recent quarter was flat, excluding higher ad costs and other items.

On Thursday, General Mills said it expects pricing and promotions to look the same over the next six months as they have the prior half year. It also sees some players in the sector moderating their promotional activity as commodity costs rise and sees raising list prices in some categories after that. 

The company’s comments were seen as a harbinger of things to come, especially since its 2011 earnings forecast missed Wall Street estimates.

“I think ‘canary in the coal mine’ is a good way to think about it,” Janney Capital Markets analyst Jonathan Feeney said. “This is the first company to talk since Wal-Mart’s rollbacks.”

Earlier this year, Wal-Mart  introduced discounts, which it calls rollbacks, on thousands of items, leading other stores and brands to cut prices.

Check Out Line: Oops, Britney designed her first clothing line

Check out the latest celebrity designed clothing line.

Pop princess Britney Spears is launching her own fashion collection that targets the schoolgirl crowd. (Editor’s note: Can I say I am relieved my daughter is only 5 and unaware of this development?)

Spears, whom Forbes magazine once ranked the most powerful celebrity in the world and still ranks No. 6, has designed her first collection of clothing and accessories for Iconix Brand Group’s Candie’s brand, for which she has been the face the past three seasons.

The juniors’ collection, called “Britney for Candie’s,” will be sold exclusively in Kohl’s stores starting July 1 to kick off the back-to-school shopping season. (Pencils, check. Backpack, check. Britney-designed little black dress, must have!)

“Designing was a really fun, new way for me to express my creativity and I really wanted to create something by me for my fans,” Spears said, adding the collection was inspired by her favorite music and movies.

Can Spears, who rocketed to fame as a teen 11 years ago with hits like “Oops …  I Did It Again” and “Baby One More Time” before suffering a high-profile meltdown in 2007 and early 2008 that included stints in psychiatric care, an ugly divorce, shaving her head and partying without panties, give Kohl’s a boost in the critical back-to-school shopping season? If all 5.2 million of her followers on Twitter come out, that would be a nice start.

Iconix will do its best to make Britney even more of a global brand name powerhouse as it plans to open specialty stores for the Candie’s brand in China.

Check Out Line: US online retailers dialing up mobile apps

Check out the increasing appetite for mobile applications among U.S. online retailers.

Nearly three-quarters (74 percent) of online retailers either already have or are developing a mobile strategy and one out of every five has a fully implemented mobile strategy already in place, according to a study from Forrester Research and Shop.org, the National Retail Federation’s digital division.

“It’s imperative for online retailers to stay on top of what their customers want and these days it’s all mobile all the time,” Scott Silverman, Shop.org executive director, said in a statement. “Mobile commerce has tremendous potential and will no doubt grow to become a significant part of overall sales volume in years to come.”

“It’s definitely the buzzword in the industry at the moment,” Daniel Latev, retailing research manager at Euromonitor International, said of mobile commerce.

Retail executives agree, saying at the Reuters Consumer and Retail Summit last week that they are taking the potential of this growth opportunity seriously at last.

Earlier this year, Forrester forecast U.S. online retail sales would total $173 billion in 2010.

“Mobile investment is modest now, but we see that it will pick up in the future, especially among the biggest brands that have already invested significant amounts in their mobile operations,” said Sucharita Mulpuru, a Forrester vice president and lead author of the study.

Check Out Line: Retail analysts mixed on industry outlook

Check out Wall Street analysts having mixed views about different areas of retail.

Eric Beder of Brean Murray, Carret & Co raised his rating on long-suffering Abercrombie & Fitch to Hold from Sell, noting that the stock is currently trading 2 percent below his previous price target. With investors now assuming weak same-store sales and inventory overhang, and with international growth somewhat lower than expected, Beder said the risk/reward potential has improved enough for him to raise his rating.

“That said, we do not see the potential for a turn in (the second quarter),” Beder said in a research note.

Meanwhile UBS analyst Roxanne Meyer said her latest store check at Abercrombie revealed a big year-over-year uptick in the breadth of promotions. She said about 60 percent of the men’s merchandise and about 75 percent of women’s merchandise was on promotion, up from 30 to 35 percent a year earlier.

“We saw a meaningful amount of men’s cargo shorts and women’s dresses marked down,” Meyer said.

Despite the weather being better than it was last year, Meyer said sales trends have been choppy in June, with about half the retailers she covers seeing increased promotions. Aside from Abercrombie, she said American Eagle, Gap, J Crew and Ann Taylor LOFT stores had bigger promotions than last year.

Top U.S. retailers will give us all a better sense of how things are going when they report June sales next Thursday, July 8th.

Check Out Line: Ron Burkle invests in yet another challenged company

Check out Ron Burkle’s continued affinity for companies in trouble.

The supermarket magnate has taken a 6 percent stake in American Apparel, according to a regulatory filing on Thursday. That’s the billionaire’s latest investment in iconic companies that just can’t seem to get back on track. 

The apparel maker and retailer, founded and run by the colorful, often scandalous Dov Charney, came close to tripping a loan covenant with its creditors but reached a deal yesterday, averting disaster.

Burkle has also upped his stake in Barnes & Noble, whose sales are still trending downward despite the popularity of its Nook e-reader, in recent months and is battling with the Riggio family for control of the bookseller. He owns nearly 20 percent of Barnes & Noble and fought, unsuccessfully so far, to double his take without triggering a poison pill. Tuesday’s annual shareholder meeting promises to be colorful.

But Burkle has also been reported in the past to be interested in stakes in big names such as the New York Times and upscale retailer Barneys. Maybe he sees these brand-name companies as able to turn things around under the right influence: his.

Also in the basket:

- U.S. retailers flex muscles with landlords - China’s rising costs signal end of U.S. retail era - John Lewis gets big Father’s Day sales boost