Retail Podcast 705: Bruce Winder Trends in Retail
Bob Phibbs interviewed Toronto-based Retail Analyst and Author Bruce Winder on current trends in retail - and more - on this episode of Tell Me Something Good About Retail.
Tell me something good about retail
Bruce Winder Trends in Retail
Bob: Today I’m talking with Bruce Winder, a Toronto-based retail analyst, business instructor, and author of the book “RETAIL Before, During & After COVID-19.” Welcome.
Bruce: Hey, thanks for having me on, Bob. I really appreciate it.
Bob: Absolutely. So with a title like that, what was the impetus for writing your book?
Bruce: Well, I’ve always wanted to write a book. And I’ve done about 30 years in retail in different jobs. And I thought you know what, I want to capture some of the trends as I see them. So I started writing it. It was mostly just sort of a trend book about best-in-class retailers and top trends. And then COVID hit and I said, “Well, I better keep writing.”
So I wrote another chapter, too, on what it was like in retail and COVID in the U.S. and Canada. And then I said, “Okay, well, let’s get my crystal ball out.” And took a run at maybe how things could be after COVID knowing that it’s all speculation, but did that and it was sort of something I always wanted to do.
And I thought it would be nice to kind of get out there and sort of summarize some trends, maybe for some people who are new to retail or didn’t have time to follow all the trends like you and I do, and it might help them out.
Bob: Well, I appreciate that. I imagine your chapter on retail during COVID probably was a little shorter than some of the other chapters. Just a thought there. And when I looked at your book, it’s, like, “Oh, my gosh, this looks really dense.” But when I look at people who reviewed it, they all talked about how you like to use puns in your writing, apparently.
Bruce: I do. I’m a bit of a music junky and a '70s rock and roll junkie, and I used a lot of puns and a lot of sort of tongue-in-cheek type titles in my writing. And it’s just to kind of keep it light and also sort of make it my own in terms of my personality.
Bob: I appreciate that. I appreciate that a lot. So tell me, what retailers...and you can use this however you want before, during, or after COVID...are doing it well, I think I will cut you quickly to say that obviously Target, Walmart, and Amazon all did great during it.
I personally think they all read Bill Gates’ book about there’s a pandemic coming up in about 10 years, which is why they all added grocery because they knew they’d be... But that’s a little cynical. So however you want to look at it, what retailers do you think are doing well outside of those players and either before, during, or after COVID?
Bruce: I think, I mean, I’ve always enjoyed IKEA. I’ve always thought IKEA was a best-in-class retailer. We talk about them a lot. And I think they’re doing good even after the pandemic. They’re starting to launch. They’re rolling out those city stores, and they’ve taken sort of the whole green initiative very seriously. They’ve embraced online. They’re just a really smart retailer and they’re vertically integrated.
Another retailer, I think, has done a great job is Lululemon. Lululemon was sort of a little bit fortunate in that they were in a category that was highly desired during the pandemic with the yoga wear and things. But they’re well managed and they have a huge runway as it relates to the men’s business, as it relates to Asia. And they’re having a few supply chain issues, they announced today.
But you know what? They’ve got a great brand. The other thing I like about them is that they own their own brands. I personally think that the future of retail is basically own brands and retailers that buy from manufacturers who don’t own the brand, I think they’re going to have a hard time competing with a large aggregator.
So Lululemon. Another retailer I like is Aritzia, another Canadian. Of course, I’m based in Toronto. Aritzia has done a really nice job, very profitable. Again, they have...the majority of their products are their own brands.
Bob: Can you explain who that is before we go too far because some may not know?
Bruce: Yes, you might not have heard of that. So Aritzia started in Vancouver, Canada, I’m going to call it, like, 30 years ago. And they offer, I would say, sort of higher-end, not quite luxury, but higher-end accessible young ladies wear. And it’s something that you would wear to the office, but it’s targeting sort of a woman in their 20s, late teens, maybe early 30s.
And they invested in their own brands. And they’ve been very smart and careful in terms of how they roll themselves out so they’re not one of those chains like Target when they came to Canada, then blew up with a hundred and some odd stores. They just sort of have added incrementally, and they’ve learned, and very profitable, very well-run, and just a great retailer.
Bob: So let’s go back to Target. Target left Canada with their tail between their legs. And yet everyone said they should have been a slam dunk, right, because Canadians crossed the border to shop at Target. It seems like it’s a no-brainer. And I had heard, anecdotally, that people had said they took over failed locations. They didn’t get the A locations when they came. But what is your take on that?
Bruce: It’s a great question. And a lot of people have been asking that for the last decade or so. But I love Target. I love shopping in the U.S. I loved it when they came to Canada. I thought this is going to be a slam dunk like you mentioned. They’re going to do great. This is a no-brainer. But I think they kind of tripped over themselves in a few ways.
One is they added a new ERP system, enterprise resource planning system in Canada and their inventories weren’t in check. They had too much and too little, store shelves were empty. They also failed to really match Walmart in some of their pricing, or at least have the perception that they were higher than Walmart. Walmart took a bit of a price war to them.
And for some reason, Target got on the wrong side of that and they lost their price perception. Another thing is to your point, they did inherit and did buy some of the sort of B locations for Zellers. I used to work at Zellers. I was a GMM there for a couple of years and Zellers was once an amazing Canadian retailer. And they sort of started losing things and started sort of asset-stripping over time with a number of owners.
And when Target got those leases, they weren’t the best. They weren’t the best locations. They also had a smaller box to deal with. The average Zellers store is a lot smaller than the average Target store. And the other thing is, I think they set expectations really high.
They said they were going to make a billion dollars a year in profit their first year, and they lost a billion in their first year. So I think it was just sadly a comedy of errors and really sad, really surprised. About 20,000 Canadians lost their job in one day. So it was a real hit for Canada.
Bob: The one thing I will take respect, though, is that the CEO could realize, like, “We’re really in trouble here. This isn’t going to get better incrementally if we don’t fundamentally either really invest and start over again or we just leave.” Do you think Target will come back someday?
Bruce: I hope so, but it might take a little while because investors have long memories. Maybe when Wall Street turns over and you have new bankers there, you might see that. And I hope they do because I think they can get it done. I think it’s solvable here.
And to your point, yes, I mean, Brian Cornell had to pull the trigger and get rid of it. And that helped earnings and kind of got Wall Street off his back. But, yes, it’s just unfortunate. I hope they do it again because I do think the brand has some potential, internationally, for sure.
Bob: Yes, I would think so. And so if we’re going to be talking about the retailers doing well. So who’s not doing well? I mean, obviously, you could say Sears, Kmart, whatever it became, it’s pretty much gone. But there’s other ones, the earnings came out in May and suddenly Macy’s and Nordstrom were saying, “Hey, it’s great to be us.” And the big players were saying, “Oh, it’s a challenging market.” So what do you make of that?
Bruce: I think some of this is just sort of which snack bracket they’re in and which stage of evolution they’re in. I’m not a big fan of department stores. I honestly think most department stores are gone the way the dinosaur, they’re just hanging on. I used to work at Sears, Canada. I was a DMM there for Craftsman.
And the writing was on the wall decades ago, not to mention sort of the way that management managed the asset in terms of more trying to optimize their financial value versus be a retailer. So I think anyone really, except for Nordstrom, except for Saks, is going to have a real hard time in department stores. There are new CEOs that come in and out.
They’ve got some nice strategies, but I think they’re just buying time, honestly. I think it’s just a channel that is in decline, and I don’t think anyone can really stop that. I do think there’s a play, though, for upper luxury department stores because there are a number of folks who are quite wealthy, and they need those department stores. But certainly, the newer ones like Nordstrom.
Now, Nordstrom has suffered as well. They’re going to have good quarters and bad quarters. They’re a great retailer. They’ve got amazing customer service. So I can’t see them going anywhere any time soon.
Bob: No, I agree. And tell me, what’s your take on the metaverse? Should all these brands be jumping into the metaverse?
Bruce: That’s a great question, Bob. I mean, a lot of people, it just exploded as soon as they changed...Facebook changed its name to Meta. And then you saw Walmart jump on there and secure some intellectual property. And that’s all you read about now. My own personal view is that it’s overblown a bit right now, more than a bit. I think it’s significantly overblown.
I do think, though, that it does make sense as a channel and as an entity, the metaverse. But I think it’s going to be a bit of a slow build over the next couple of decades before it gets to critical mass, at least a decade before it gets to critical mass. I understand why retailers are investing now.
They want to get a toehold. Then they want to get the real estate. They want to get on the right sort of partners and things like that. But I do think it’s going to be a very slow build, and it won’t be worthy of the press that’s getting right now.
Bob: Well, we got to talk about something. And Amazon already did their drones. So what else we could do? Now, you’re donating 5% of the proceeds from your book to the mental health programs in the U.S. and Canada. So why is that?
Bruce: Well, I actually...I suffer from some mental illness myself, and I’ve been open about it. I have OCD, obsessive-compulsive disorder. And a lot of people think if you have OCD, you’re just really organized. Well, it’s a little more to it than that. It can be real tough. I’ve been treated, and I can lead a fairly normal life. But I wanted to sort of create a bit of a dialog and bring it to the forefront of retail.
And I’m writing another book actually on neurodiversity, which hopefully comes out in the next year or so. But I wanted to sort of give back, and I also wanted to create a conversation. There’s a lot of great discussion about diversity right now as it relates to Black Lives Matter, gender, etc.
I want to put this on the table, too, and say, “Hey, you know what? There’s some really great people who are neurodiverse maybe who have autism, OCD, Tourette’s, dyslexia, who can do some really good things. But you just have to put them in the right spot.” And that’s the key to it, I think.
Bob: And how do people know that? I mean, is it something that you have to be well versed and so you see the opportunity with this person. Is it something that the person can say, I was watching Temple Grandin not that long ago. Great movie, and you realized how she was able to kind of take what she had inherently done to make herself feel better and then brought that to...well, to cows?
I’m not going to go any further into what she ended up doing with it. But the whole idea was she was able to be in the place where that actually could come to the fore. I’m just curious, how does it happen? Is it someone seeing the potential, or is it for the person to understand this is what works best for me?
Bruce: It’s a really good question because that’s kind of we’re on the cusp of that right now. And from what I’ve read, I’m doing some research now and there’s been a number of companies, mostly in the tech industry, that have embraced neurodiversity. And it’s kind of a combination. It’s them getting educated and realizing that, especially, with the tight labor market in some areas, they’ve got all these people who have some great skills, great education.
They just might not be as social as other people. And so it’s sort of it starts with awareness and understanding on the company side, but it also requires some effort on the candidate’s side to come forth and be honest, and identify it. And then it’s sort of a kind of a meeting of the minds.
And there are some best practices, which I’m going to hopefully talk about in this book, that sort of creates the matching of these two groups so that people who are neurodiverse can find a home and contribute to society and companies can get some great creative people because that’s one of the thing neurodiversity is known as people who are really good with creativity, thinking out of the box, and things like that.
Bob: I think that’s the key. I grew up in the '60s and everyone was supposed to look like the Procter and Gamble ads. Everyone was supposed to have that life and there was no idea of diversity. We were all supposed to do the same.
And now it’s kind of, like, “Oh, our unique DNA is the fact that everybody is different, and it doesn’t make it better or worse.” I guess that’s the thing that was so challenging with growing in my age, anyway, was there was this stigma put on anything different, “My, God, she is wearing her hair short. He is wearing his hair long,” right?
Bruce: Especially in the '60s, yes.
Bob: Right. And so the whole idea now is upended it because quite simply, and staying with retail, the retail market is, “We are all a little bit weird and different. We all can’t be one thing.” And that actually is better for retailers, don’t you think?
Bruce: I do. I think so. And I think companies are starting to recognize that now because you’re right. I mean, I did 22 years in big corporations, Canadian Tire, Zellers, HBC, and Sears, and I had everything. And I had the short hair and clean-shaved, and white shirt and blue tie. And that’s the only way to survive is to kind of fit that mold, “Don’t vary from that.” You’ve got to drink the Kool-Aid.
And that was the way it was then. And I’m hoping that there’s an opportunity to sort of get a bit more diverse now, where companies realize that by having different points of view, different ways of thinking, different personalities, different opinions and ideologies, they can actually do a better job.
Another argument, too, is that, “Hey, when you look at the customer base of the U.S. and Canada, it’s not all a bunch of white guys, right, old white guys.” So it’s really healthy to have people mixed into your company who understand your customer because they look like your customer and act like your customer.
Bob: I would agree. So give me, like, three trends that are in your book “RETAIL Before, During & After COVID-19” that you think have legs in the next 5 or 10 years. I’m not a fan of... I don’t think curbside is going to be it myself because once the pandemic ends, I didn’t see people lined up waiting for that. I think there’s an element of people who says, “Oh, you wait.” Maybe. So what would your top three be?
Bruce: Well, I think one of them for sure is going to be the increased use of technology. And that’s pretty broad, but I think we’re at a point now where technology is just going to get more and more important, whether it’s self-checkout cashiers, whether it’s A.I. helping to set promotions, whether it’s robotics in the warehouse, whether it’s virtual change rooms, the metaverse, augmented reality, virtual reality.
There’s a whole host of facial recognition. They’re all there. And I think you’re just going to see more and more of that. And that’s probably an easy one, that’s low-hanging fruit. I think we would have all said that. Another one has some legs, too, and again, not a big surprise is the whole Green Movement, the environmental movement, especially with folks who are a little bit younger.
They see the writing on the wall. We all see the weather change, and there’s more floods, there’s more droughts, there’s forest fires. So I think this is real. And people realize that we have to think about these things. And there’s been some back and forth because even the investment community, the institutional investment community has made it very clear that they’re not going to invest in companies that aren’t embracing the Green Movement.
But I think it’s here to stay. And I honestly thought that companies would kind of take the gas pedal off a little bit during the pandemic because they had bigger fish to fry. But you know what? They didn’t, and it’s going to keep going. So that’s what I would say is number two is just the continued greenness.
I think you’re going to see more. You know what? I’m from a global sourcing area and you know what we think of total cost of ownership when you add everything in the cost of a product, when you buy it offshore, well, they’re probably going to start adding in a green tax. They’re probably going to start adding in a CO2 emissions cost in that total cost of ownership.
And that’s when things are going to change. So that would be number two. Number three, I think you’re seeing sort of a used products movement. I think that has legs to value, a flight to value, maybe not as bad as the '30s after the Great Depression. But I think you’re going to see people might be tied in with the green, but sort of value-based used products, experience products.
It’s no longer taboo. When you and I were young, no one wore used clothes or did anything used. It was almost embarrassing, right? It was, like, you’re down and out. Now, there’s a lot of youngsters, Gen Zs, younger millennials, who see this as actually an important way to save money, but also to help the environment, too.
So I see a lot of activity with retailers. Everyone from thredUP to whoever really sort of getting into this experience market, even luxury products, a lot of Rent the Runway or RealReal, and things like that, lots of activity there.
Bob: So I’m going to challenge you on two of your trends just so we can have something to spar with. The whole used idea for me is it’s a lot of money chasing a non-profitable sector. Retail is not engineered to go backward, it’s designed to go...raw materials come and they go through the system.
And even though we’re hearing people that are, like, “Oh, REI is now doing used and some other people are doing it,” I just keep wondering...it’s a great marketing program, I just wonder if it really does. And when I look at thredUP and all these ones who are darlings for a while and then they went suddenly, like, “Holy crap, we’re not making money at this.”
It also goes to your other one about green that, “Yes, everybody is talking about sustainable. Oh, sustainable. Oh, yes.” I just think if it didn’t have a press release, would it be sustainable? But if you look at Shein, one of the biggest retailers out there in the world out of China, they’re delivering more products, I guess 6000 SKUs a week and being shipped around the world.
So on the one, here, we’re hearing, “Oh, they’re so concerned about sustainability.” Yes, well, maybe. But I guess where I look at both of those is how they impact a retailer in the store because if I’m a guy, and I buy most of my products as used and you put me in charge of the Tommy Hilfiger or Tommy Bahama or Tom Ford, any other Tom I can think of, are you really going to be able to sell that merchandise? Are you really gonna be able to make your customer feel confident? So I’d just be curious about your thoughts on either or both of those.
Bruce: I think you bring up some excellent points and I wouldn’t discount those. I think you’re bang on. I do think, though, that almost like when e-commerce started and e-commerce even now, it’s going to take a while for companies to figure out how to make money on the used thing. I do think there is a market there. I do think you can make money, but I think people are still figuring it out in terms of how to make money.
And that was very similar with e-commerce. There’s only a handful of companies still who are making money with e-commerce. They’re still trying to figure out how to make money. To your point about reverse, right, and handling returns and all those things, right? So I do think there is hope there. I do think someone will figure it out eventually because there is a market there and there’s supply and demand.
So I think someone just has to be smart enough to figure out how you make that work. On the green thing, you’re right. I mean, it is sort of something that’s trendy, and it’s a great marketing piece right now. I think people are going to be forced into taking it more seriously because I’m a capitalist 100%. But what I’ve noticed, and I’m not the only one, over the last 50 years, is that wages are fairly flat, but cost of living has gone up.
And I think younger people... there are more people who are living at the margin and that margin is getting tighter. And they have to find new ways of surviving. And I think that this is going to force them to think about doing things green.
I do think, too, as the weather starts to get worse and worse and worse...I have noticed a marked difference between the last 10 years...I do think that governments may have to put some more legislation in because consumers may demand it. And companies are going to have to take this even more serious. And it’s going to be a bit of a sort of a wrestling match between the right and the left.
But I do think the weather patterns are probably going to...Mother Nature is probably going to break the tie on this one. So, again, it’s one of those things where I think it’s new. You’re right, there’s all kinds of ugliness and inefficiencies and poor economics, but I think the raw material is there for these things to stick. But someone’s gonna have to get real innovative in terms of how you pick the right business model.
Bob: Excellent. So, Bruce, why do so many brands chase lower price points in an era when customers can’t even find what they’re looking for?
Bruce: You know what? I think it’s one of those areas where it’s like a temptation. It’s like crack cocaine. You sort of get on it and you need to hit certain volume numbers and price points and market share numbers and even sales numbers. And it’s sort of like a race to the bottom. They go there and they try to reach that lower point because there’s some volume there.
You can get a rush, you can get a quick bump in sales if you come out with these lower price point products. You mentioned Shein earlier. I mean, look at Shein. They’re practically giving it away in terms of the cost of that and people are eating it up. So I think there’s a natural temptation there. And to my point earlier about sort of income disparity. There’s a lot of people living at the margins.
So there’s a lot of action down there. But to your point, it’s not the best place to be. It’s really a race to the bottom. You can’t make money there unless you have the infrastructure like an Amazon or like a Walmart that can actually make money and still sell stuff for 15 bucks. Most people can’t.
Most people can’t make money and sell stuff for 10 or 15 bucks. So they’re better off trying to create a unique brand that is exclusive to them, offer a service, offer something like a niche in the market and charge somewhat of a premium. I think there’s better long-term prospects there.
Bob: Yes, I would totally agree. And when you talk about trends we hear that private label is still going very strong. But as we started out this interview, you were talking about how brands are really important that...
In fact, Levi’s yesterday, they talked about how they’re going to go out and buy some more brands that they think they can do more to blow up these brands...and probably terrible word to use...but to make them bigger by keeping their name instead of absorbing them into the main Levi’s line.
So which is it? Are we moving to staying with a branded or are we moving still to private label, or is it both?
Bruce: I think it’s probably both, Bob, in my opinion. Both of us have seen a marked increase in private label over the last two or three years from everyone. Every time I read something, it’s a new private label from someone. And obviously, you and I know the reasons for that is because you can make more margin, you can control your sourcing, and you can create sort of a loyal following from your customers.
So all the math makes sense. The other thing is that a lot of national brands are selling either Walmart or Amazon, not both. Usually, they kind of pick one of the poisons or the other, one or the other. And that means that you’ve got to compete with those big boys on price if it’s the same item. So private label helps a lot to differentiate that. I do think that brands are super important. Select brands are super important.
And it’s either sort of a label at a retailer or it’s a national brand with some cachet and even some retailers. So up here, we have a retailer called Canadian Tire. I used to work there for 18 years. And they’ve done some really neat stuff, too, kind of like Target does in the U.S. They get sort of a name and it already has a lot of cachets. It’s kind of already a national brand, and they buy it. And they absorb it and they use that.
So it’s not just sort of a no-name label. It actually has some cachet already. It already has some brand equity, and they can control that. So I think brands are going to be big. There’s a lot of discussion right now on the whole DTC, direct-to-consumer play.
I know there was an analyst in New York who came out with sort of a counterargument on that, which is interesting, in terms of can you make money? But I do think that is going to grow. I think you’re going to see more national brands trying to sell direct while also selling through channels. So I think branding is going to get even more important than it is now.
Bob: Excellent. Well, we are coming to the end of our time together, my friend, and the name of the podcast is “Tell Me Something Good About Retail”. So I always ask all of our guests tell me something good about retail.
Bruce: Okay. Well, what I would say about retail is it’s an amazing industry. It’s fun, it’s ever-changing, it’s not for the faint of heart. But you know what? It will live on forever, long after you and I are around. And it’s changing all the time, and it’s fascinating. It’s like an orchestra. It’s just beautiful to watch.
Bob: I love that. And with that, I thank you all for joining us today on “Tell Me Something Good about Retail.” And you can certainly check out Bruce’s book, “RETAIL Before, During & After COVID-19” in your favorite independent or online store. And thanks for being a guest today. I appreciate it, Bruce.
Bruce: Thanks, Bob. I really appreciate the time.