Target has been one of the biggest winners in the toy business since the 2018 liquidation of Toys”R”Us. The demise of the only sizable national toy chain enabled discounters (led by Walmart, Amazon, and Target) to extend their growing dominance in toy sales.

That said, a disappointing holiday performance in 2019 taught Target that success has to be earned. An omnichannel partnership with a relaunched Toys”R”Us (under new ownership) failed to meet expectations, as Target’s toy sales remained flat during the 2019 holiday season relative to 2018.

Target’s toy business has been on the rise again for the past few years. In a bid to continue that momentum, the company recently unveiled a multiyear exclusive partnership with iconic toy retailer FAO Schwarz. But with the economic backdrop weakening and Macy’s recently opening Toys”R”Us shops in all of its stores, the FAO deal may not be enough to keep Target’s toy business growing.

To some extent, Target has been winning in the toy business since 2020 for the same reason it has been gaining market share in general. As a one-stop shop, Target benefited from consumers consolidating shopping trips during the pandemic. And with stimulus dollars filling shoppers’ wallets, Target customers have been eager to add toys to their shopping baskets.

Cleaning Up in the Toy Business

Notwithstanding its weaker-than-expected results during the 2019 holiday season, Target has benefited immensely from Toys”R”Us’ downfall. In early 2020, CEO Brian Cornell noted that Target had increased its sales in the toy and baby categories by over $1.7 billion since Toys”R”Us and Babies”R”Us folded in early 2018. Those two categories accounted for nearly a third of Target’s top-line growth between 2017 and 2019.

Sales growth accelerated dramatically during the Covid-19 pandemic. In fiscal 2021, Target posted net sales of $104.6 billion: up by $27.5 billion (36 percent) from 2019. Sales growth has continued in 2022, albeit at a slower rate.

Toys have been a standout during this period. For example, Target reported comp sales growth of more than 40 percent for its toy business in the first quarter of 2021. Toys remained one of Target’s strongest-performing merchandise categories in the first half of fiscal 2022, including high-single-digit growth in Q2. This indicates that Target continues to gain market share. U.S. toy sales grew just 2 percent in the first half of the year, according to NPD Group.

To some extent, Target has been winning in the toy business since 2020 for the same reason it has been gaining market share in general. As a one-stop shop, Target benefited from consumers consolidating shopping trips during the pandemic. And with stimulus dollars filling shoppers’ wallets, Target customers have been eager to add toys to their shopping baskets.

The company has also forged partnerships with popular kids’ brands to drive growth. After piloting 750-square-foot Disney shops in 25 stores beginning in late 2019, Target expanded its Disney shops to more than 160 locations in time for the 2021 holiday season. And during the 2020 holiday season, Target partnered with FAO Schwarz for an “exclusive 70-piece toy collection.”

Toys”R”Us’ Third Act

While Target has been firing on all cylinders in the toy category, it also faces looming threats. Inflation is starting to pinch discretionary budgets for lower and middle-income consumers. Meanwhile, as Americans have become less concerned about Covid, they have begun visiting “nonessential” retailers more frequently. This will lead to a more competitive environment.

Most notably, Toys”R”Us is making another comeback attempt under yet another ownership group, this time in partnership with Macy’s. While Macy’s and Toys”R”Us announced their tie-up over a year ago, initially, this merely involved the Toys”R”Us website redirecting shoppers to macys.com to make purchases. That was no different than the disappointing Target-Toys”R”Us partnership of 2019.

But over the past three months, Macy’s has opened Toys”R”Us shops in all of its full-line stores. Even the smallest of the new toy shops occupy 1,000-square-feet. At 11 “flagship” locations, Macy’s has set aside up to 10,000-square-feet of space for Toys”R”Us. Macy’s also plans to expand the new toy departments seasonally by 500 to 3,000-square-feet.

Adding Toys”R”Us shops in its stores won’t make Macy’s a serious rival to Target’s toy business overnight. For one thing, Target has a much broader store footprint, with over 1,900 locations, compared to around 450 full-line locations for Macy’s. Target also has a long-established toy business and the benefit of consistent traffic from customers coming to buy food and household essentials.

That said, Macy’s is already seeing enormous growth in the toy category (albeit from a small base). In the first quarter of fiscal 2022, toy sales grew 15-fold year over year, and that was before the company had rolled out its permanent Toys”R”Us shops.

With discretionary spending slowing, Macy’s big move into the toy business is bound to take sales from someone. Target needs to make sure it isn’t one of the victims.

Target Responds

Enter the new Target-FAO Schwarz collaboration. As noted, Target featured an exclusive capsule collection from FAO Schwarz during the 2020 holiday season. But at that time, FAO Schwarz was also distributing products through various department store chains.

By contrast, the multiyear agreement announced in September makes Target FAO Schwarz’s exclusive retail partner. The company will sell over 120 items from FAO Schwarz this holiday season, and all Target toy departments will feature dedicated FAO Schwarz sections.

Many of the FAO Schwarz toys coming to Target will be affordably priced under $20. But some items will retail for up to $149.99. This suggests that Target hopes to continue making inroads with higher-income households through this brand partnership.

Of course, Target isn’t relying solely on FAO Schwarz to drive growth in its toy business this holiday season. The retailer will also continue the rollout of its Disney shops, growing that concept to more than 200 total locations by year-end.

Will It Be Enough?

Forging an exclusive partnership with FAO Schwarz should give Target’s toy business a boost on the margins. Nevertheless, this move is unlikely to be a game changer like the Macy’s-Toys”R”Us tie-up.

FAO Schwarz never had a large store footprint like Toys”R”Us. And following a pair of bankruptcy filings nearly two decades ago, the upscale toy retailer closed all of its branch stores, retreating to its New York and Las Vegas flagships. (The Las Vegas store subsequently closed in 2010 due to the Great Recession.)

As a result, FAO Schwarz has much lower brand recognition than Toys”R”Us. In recent weeks, Google search volume for Toys”R”Us has been more than five times that of FAO Schwarz. The disparity is even greater outside of New York.

In short, FAO Schwarz is not a very powerful brand anymore beyond its home market. Thus, it is unrealistic to expect the FAO partnership to drive a meaningful bump in toy sales for a retailer of Target’s scale.

To be sure, Target’s strong performance in the toy category during the first half of 2022 is encouraging. But the impact of inflation on consumers’ wallets is increasing, Target is lapping a big wave of Disney store openings from 2021, and Macy’s has now opened its brick-and-mortar Toys”R”Us shops. Even with an exclusive FAO Schwarz partnership, Target faces an uphill climb to continue growing its toy business in the 2022 holiday season.

Full disclosure: The author owns shares of Macy’s.

If Walmart and Target are canaries in the retail coal mine, maybe there’s a third canary in the economic coal mine named Elon Musk who recently said we are already in a recession. Think what you will about Mr. Musk and his eccentric and stratospheric imagination … maybe he’s right. My friend Richard Baum, Managing Partner of Consumer Growth Partners, reminded me that “It’s pretty common knowledge that by the time the government officially declares that we are in a recession, the country is usually on its way out of it. Not real genius on Elon Musk’s part for that observation.”

Financial Chaos

The crash of Walmart and Target’s first-quarter operating margins unveiled last week (well below what their respective CEOs expected) with only modest sales gains, led to their biggest single-day stock market declines since Black Monday in 1987. It also bled through the retail sector in general, driving selloffs. Worse, as reported by the NYT, last week’s selloff of both the Dow and S&P 500 “nearly ended the bull market that began after the start of the pandemic. It has been decades since stocks have fallen for such a prolonged period. The Dow Industrials notched their eighth straight weekly loss, the longest streak since 1932, near the height of the Great Depression.” Yikes! And yikes again. “The S&P 500 and Nasdaq had their seventh straight weekly loss, their longest such streak since 2001, after the dot-com bubble burst. All three indexes finished the week down at least 2.9 percent,” continued the report.

Just as we were unable to recognize the Covid canary, we absolutely did not see a supply chain breakdown that continues to this day. Likewise, we didn’t see the Ukraine canary with the Russian invasion, which is disrupting the global supply as well as distribution of oil and agricultural commodities.

The Canaries

Walmart and Target are canaries since roughly 70 percent of GDP growth is consumption. And since retailers are on the front line, so to speak; and these two giants are bellwethers for the entire retail sector, one could make the case that when they lose oxygen (aka business) it is a recession foretold.

The pandemic wasn’t a canary until we realized it was, and much too late. In hindsight, if we had known how long and deep it would extend globally, and the level of disruption and destruction it would inflict, we could have prepared for it. Instead, we only reacted. And the blunt instrument we used to literally save our economy was a firehose of trillions of dollars directly into the hands of citizens and businesses to prevent another 2008 meltdown.

That playbook did maintain the economy on a slow growth trajectory. However, just as we were unable to recognize the Covid canary, we absolutely did not see a supply chain breakdown that continues to this day. Likewise, we didn’t see the Ukraine canary with the Russian invasion, which is disrupting the global supply as well as distribution of oil and agricultural commodities. Let’s keep going. There are multiple canaries staring us right in the face. We didn’t plan for the U.S. commitment of over $50 billion worth of weaponry and humanitarian aid to Ukraine (so far). And we didn’t anticipate China’s zero-Covid policy resulting in massive lockdowns, which have and will continue to disrupt global supply chains. On that front, we still don’t know the extent of the China factor that is exacerbating the ongoing post-pandemic supply chain mess.

Connecting the Dots

Long story short, consumers amassed over $2 trillion (just think about that) in their savings accounts from the Fed’s pandemic firehose with enough money left over for spending. But no one connected the dots to understand how supply chains were getting totally screwed up post-lockdown and how consumers would behave once they were liberated.

Retailers were totally inventory-challenged, mostly guessing about supply and consumer demand needs, and when and where the supply needed to be delivered. No surprise here. Businesses in general, and particularly retailers across all sectors, had much of their supply sitting in cargo ships offshore waiting their turn for days and weeks to unload in seaports. And then there was a shortage of trucks and truckers to distribute the goods. Furthermore, the goods sitting in those ships were dated quickly and ended up as irrelevant to what consumers wanted and needed once they started shopping again.

Misjudging where and what consumers would be spending, Walmart’s inventory increased by 32 percent and Target’s shot up 43 percent. The result? Too few or too many goods, or the wrong goods to meet the demands of consumers, flush with cash and higher wages. The next result? Inflation. The result after that? Rising costs for production, logistics and distribution of goods (particularly oil, gas, commodities, and groceries). And the final result? Rising prices and declining sales and profits. We’re in a negative feedback loop that, if it continues spiraling downward, will lead to a recession.

How can a recession be avoided? Theoretically by the Federal Reserve “artfully” raising interest rates to reduce demand, which seems counterintuitive as it also dampens growth, particularly in high-ticket items like home mortgages, automobile loans, and credit card interest. So, one could say that even if the economy does not slip into a textbook definition of recession with the GDP falling for two successive months, it is still a downturn that will have a significant impact on all consumers.

Chasing Inflation

How would you like to be Fed Chairman Jerome Powell who is expected to defeat inflation without causing a recession? Before Russia’s invasion and China’s zero-Covid policy, Powell stated that inflation would be transitory. However, as more and more unexpected global catastrophes began to unfold, he then recalibrated and said he would likely hike interest rates sooner and higher than originally thought necessary.

According to PIMCO, the inflation rate in March was about 8.5 percent, dropping to 8.3 percent in April, and back up to 8.54 percent in May. Kiplinger predicts the inflation rate will ease over the rest of this year but will likely end 2022 at a still high rate of about 6.3 percent. And in 2023 the rate should fall faster, down to 3.0 percent by the end of the year.

Consider this:

• The higher cost of housing will keep inflation rates elevated for some time to come. Gasoline prices and heating costs are likely to stay high for a good while because of the war in Ukraine, but they may plateau instead of continuing to climb.
• The prices of cars and trucks will also stay at a high level until the semiconductor shortage ends sometime next year.
• Continued spot shortages of various items will drive their prices up, adding to the overall inflation rate. The latest is a shortage of baby formula.
• Continued inflationary pressures will likely spur the Fed to keep hiking short-term interest rates. Short rates will likely reach 2.5 percent by the end of the year.
• The 10-year Treasury note has already risen to 3 percent in anticipation of the Fed’s hikes but may edge up further.

Retail Futures

How will all this impact the retail industry? Moody’s Investors Service said, “We expect sales to increase two to four percent, while operating profit is set to decline one to three percent over the next 12-18 months.” They lowered their outlook to negative from stable for the U.S. retail and apparel industry.

Granted those numbers are predictions, and since their crystal ball is full of more data and logic than mine, they may be close to accurate. My prediction is slightly more prosaic: Because we didn’t anticipate a cage full of canaries let loose on the world, we did not prepare for them. And by not connecting the dots to what these canaries symbolize and can disrupt, we are still racing to adjust and react to them. My take is less about the numbers and more about the strategic need to be prepared for the future, not catch up to it. Scenario planning aside, a lot of this is practicing good common sense.

Oncoming Trains

At the end of the day, most of the guesswork and action must come from the brilliant minds in the Fed. Hopefully if Powell raises rates “artfully” enough to contain and stabilize a potentially runaway inflationary spiral (as opposed to using a sledgehammer) we can avoid a deep recession. For the record, during the 1970s, when the inflation rate grew from 5.5 percent culminating at 14 percent in 1980, then Fed Chairman Paul Volker used a sledgehammer and in doing so, he slammed the U.S. into a recession that lasted through the decade.

And get this: Since mid-2021 through February 2022, the U.S. averaged an inflation rate of 5 percent. Do I hear an echo? In my opinion, with all of the unraveling still going on in the geopolitical world, the war in Ukraine, China’s lockdowns, continuing supply chain disruptions, ongoing worries about virus variants, inflation rising faster than wages, a cutback in consumer spending, and rising costs for businesses with reduced operating margins and profits — along with other chaotic parts of the global condition that I surely missed, Chairman Powell can be as “artful” and gentle as he wants. But honestly, if we are not already on the edges of Elon Musk’s stated recession, I believe it is inevitable. Retail leaders: To be forewarned is to be strategically forearmed.

Spoiler alert: This is a strategic perspective, not a financial review – on purpose.

The current three-front perfect storm for Macy’s and Kohl’s could arguably be described as a pursuit of a post-Covid higher level of positive “normal,” managing through inflation and supply chain impediments, and the threat of greedy activists. And the major stories coming out of their recent investor presentations were their focused repositioning strategies, aligning merchandising and distribution with young consumers’ preferred products, and enhancing shopping experiences.

Target

Target has proven my often predicted “localization” and “personalization” strategy as critical for success among legacy retailers who are in the process of transforming. As an essential retailer during the pandemic, Target gained time and a capital advantage, which they brilliantly put to use by investing heavily in perfecting their omnichannel model, ramping up on their youth-focused national and private brand initiatives (including the launch of Ulta Beauty’s in-store shops), and most importantly, rapidly expanding their local, neighborhood small-store strategy. As of 2019 (no recent updates available), there were over 100 small stores (an average of 40,000-square-feet), about 23 on college campuses, and their strategy is to add 30 to 40 a year. According to Cornell, “We’re opening up Target stores near America’s most iconic tourist destinations: Times Square, Disney World and the Las Vegas Strip. Because we learned from our store at Herald Square, there are few places that help travelers feel more at home than Target.”

Macy’s

At the recent UBS Global Consumer and Retail conference, Macy Inc.’s EVP and CFO, Adrian Mitchell said their off-mall specialty brick-and-mortar strategy of smaller, local stores will contribute “a material level of volume over time. The data seems to show that those off-mall locations that are very convenient to where customers live, shop and work are actually quite relevant and an important part of how we think about our strategy. We very much believe that Market by Macy’s, serving our Macy’s brand, and our Bloomie’s small-store format serving our Bloomingdale’s brand, are critical to the growth of our stores’ channels, and critical to the growth of our omnichannel business.”

Michelle Gass said, “We are evolving our position from a department store to a more focused lifestyle concept, centered around the active and casual lifestyle. This is unique and we can own this space. Make no mistake, this is a transformation, it is a complete reinvention of our business model and our brand.”

Mitchell continued, Market by Macy’s is seeing “sales beyond our expectations … so getting that location right is really important, and we’re seeing those convenient high-traffic locations really produce. It’s a fundamentally different experience but a relevant experience. I’m really excited that the number of new customers shopping these stores is materially higher than mall-based stores.”

Check those boxes on localization and personalization! Mitchell pointed out that doing business at a very local level has customer experience scores meaningfully higher than Macy’s mall-based stores and provides easier navigation, quick and easy checkouts, and more sales associates to assist and interact with customers.

Bloomingdale’s small-store Bloomie’s strategy was launched in Alexandria, VA, offering contemporary and luxury brands, services, tech-enabled stylists, new store design concepts and a restaurant. While the rollout strategy was not outlined by Mitchell, I have to assume that if the Alexandria location is successful, a similar expansion strategy will be put in place.

While Macy’s stated in 2019 that they would close 125 stores between 2020 and 2022, only about half have been closed. Jeff Gennette, Chairman and CEO of Macy’s said, “We have delayed most of the remaining closures we earmarked in 2019 in order to maintain a physical presence in many markets while we scale up our off-mall format stores. In addition to being a place for discovery and shopping, our stores are now also fulfillment hubs supporting our digital operations through buy-online, pick-up in store, curbside pick-up and same-day delivery. Keeping these cash-positive stores open also helps to fund the investments we are making to reposition our fleet over the next several years.”

Macy’s and Bloomingdale’s are also developing online marketplaces which will greatly expand the number of products, brands, categories and all in greater depth. Mitchell said, “Digital sales per capital in markets where we have stores, even mall-based stores are three times more productive than markets that don’t have it. So, the notion of winning in omnichannel is also recognizing the critical importance of stores.” And in another nod to their off-mall strategy, he said, “We feel that we have to place our stores in more convenient locations. I will say very clearly that repositioning and optimizing the physical footprint is a must-win initiative for Macy’s to be relevant over the next 10 years.”

Kohl’s

Just as Kohl’s pioneered an off-mall, small-store distribution strategy opening stores in neighborhoods and shopping centers during the 90s, capturing young working moms who did not have the time to drive to and shop through the malls, they are once again envisioning a new fleet of smaller neighborhood stores (35,000 vs. their current 80,000-square-feet stores). They plan to roll out 100 over the next four years, following the launch of its first prototype in Seattle this fall. CEO Michelle Gass told WWD the small stores have “a level of flexibility and hyper localization.” For example, in Seattle there would be an intensified assortment of outerwear that’s localized and tailored to the local climate and customer base. Kohl’s has invested in a new platform to use data science for more granular merchandising decisions on a local store level. As a part of Kohl’s repositioning, they are also investing in modernizing and refreshing the store layout to elevate the shopping experience.

About Sephora’s beauty shops, currently in 200 Kohl’s doors, Gass said it’s “a game changer,” generating $2.2 to $2.4 million in sales per Kohl’s store. Executives also said that 25 percent of those shopping Sephora are new Kohl’s, and many decide to shop other categories while in the store. Kohl’s plans another 400 Sephora shops by the end of 2022 and 850 by the end of 2023, projected to generate $2 billion in sales.

Gass said the Amazon shops (now in all of Kohl’s roughly 1200 stores) generate “millions of new customers” who are primarily returning Amazon purchased goods (an estimated 2 million returns in 2020) however, while in store, many are shopping and purchasing other goods.

And to change Kohl’s culture mindset, Kohl’s is eschewing the department store moniker. Gass said, “We are evolving our position from a department store to a more focused lifestyle concept, centered around the active and casual lifestyle. This is unique and we can own this space. Make no mistake, this is a transformation, it is a complete reinvention of our business model and our brand.”

Don’t Follow the Numbers

I’m exaggerating about ignoring the numbers to make a point. There are a multitude of sources that have covered the numbers and speculation of what they mean, and as I said, this article is about the strategy. There is also a media obsession about the activists who foolishly create a narrative of how they can “unlock value” in the short term … AKA making a lot of money fast.

I say pay attention to the strategy. Because if the strategy and its execution are right, the money will follow. Just look at Target. Macy’s and Kohl’s, with similar strategies, are slightly behind Target in their execution, some of the lag due to their nonessential classification during the pandemic.

I say give them a break. However, I must emphasize that “execution” is the operative word. I once lauded Ron Johnson for his transformative vision for JC Penney (which I still do). However, his extremely poor execution crippled the brand, which to this day is still struggling to stabilize out of bankruptcy.

A former CEO, Allen Questrom, took the helm of a limping JC Penney in the early 2000s and famously and figuratively told Wall Street “don’t follow the numbers.” Between the lines, he told the financial world and shareholders not to expect a profit for about five years. He went on to successfully execute a strategy that did right JCP’s sinking ship.

Likewise, I witnessed CEO Brian Cornell telling analysts that he was committing to a capital investment of some $8 billion over about five years to essentially turn Target’s business around. And right there in real time, during the meeting, I watched their stock price on Yahoo drop like a rock as he advised that the bottom line was going to be squeezed. He not only turned it around, but he also recently was awarded the NRF Retailer of the Year.

To Macy’s and Kohl’s: Stay focused on the long-term, listen to your customers and fine-tune the strategy as needed, and execute, execute, execute. Any retailer can have a good idea, but pulling it off is what defines the greats.

No retail segment is more competitive than the mass segment, where retailers sell many of the same SKUs and must therefore compete based on differentiated consumer perceptions of value, access, convenience and customer experience. In 2016, the Target Corporation — facing scorching competition from Amazon and Walmart and saddled with negative comps — decided to check \”all the above,\” including product selection. In early 2017 the company launched a major, multi-year set of initiatives to remodel stores, improve store operations, expand omnichannel capabilities, increase the number of small-format and campus stores, and introduce dozens of new owned brands. A year ago, the company decided to accelerate these investments, and given their more recent operating results, they seem to be paying off.

It\’s a difficult trick. A superior customer experience in a store often adds expense. Offering the complete suite of omnichannel options (including same-day to home or curbside pick-up) also adds expense. With these added costs, how will Target also excel in delivering value? Will this business model foot?

The New Customer Experience: A Great Start but Missing Basic Elements

The digital look and feel of the brand strongly reflect the company\’s new direction. My www.target.com landing page featured three new brands in all their inclusive splendor; the day\’s most pressing shopping occasions and new omni-enabled ways to \”get your Target Run done.\” A very different approach than Amazon or Walmart. It seems to be working and Target\’s e-commerce, facilitated with its many omnichannel options, was up 36 percent in 2018.

Based on recent store visits I made in Columbus, Ohio, the in-store customer experience was a big change and represents a new business model. The new, remodeled, and re-fixtured stores, all with new marketing and visual merchandising, are a big improvement over the \”old\” Target packages. The company is essentially applying the techniques used for decades in better department, specialty and upscale grocery stores. Several departments are introduced with low tables and stands for displays, folded product or forms; varied fixture heights and types of different fixtures to allow for good visibility and provide visual interest. Many of the aisles are now shorter in height and length and not all are parallel. Moreover, the displays and décor often showed enough sass to make you smile. I had never noticed the music before in Target, but the tracks had me \”boppin\” in the aisles. The total effect is that the store is more attractive, more fun and easier to shop. The discrete sections, when merchandised well, suck you in to spend more time and money. Store traffic and comps were up 5 percent over the past year.

While the new format has raised the aesthetic bar, not all aspects of execution reached it. Several displays of folded product were askew or unkempt, and several bays read conspicuously empty or low on inventory. The swim trunks on one young mannequin rested around the boy\’s ankles. There scurried no hawk-eyed associate nearby to fix any of these issues, even on a busy Saturday. Luxury-inspired displays will always feel less upscale, too, when bathed in Target\’s fluorescent bulb temperatures. The company has selectively mounted halogen spots in the high ceilings, but the warmth added from those is often not sufficient.

Target says they are improving backroom operations to allow associates to spend more time on the floor for \”customer-facing\” activities. Let\’s hope its end-state business model will allocate enough resources to fix the merchandising and inventory issues.

A potentially bigger miss, in my opinion, is the stores\’ failure to change its associate engagement with customers. In a bright, happy, engaging store, we shoppers expect bright, happy, engaging associates providing great service. One consistently gets energy from Costco, Container Store and Crate & Barrel employees. At Target, my engagement with the associates was unchanged from the many years I\’ve been shopping there. And is still uninspiring.

Finally, there were still longer-than-necessary lines at checkout, queued next to several unmanned lanes – with the longest line at self-checkout. I actually like to shop in stores but am always anxious when I\’m not sure if I\’m in the quickest line. Why not train a camera with some AI to direct me to the shortest wait? Or, more old school, open up a lane or two so there is less of an annoying wait.

The Key to the New Business Model Lies in the Merchandise Strategy

In Target\’s more recent public reporting and analyst coverage, all referenced the growth and success of its new omnichannel efforts and its impact on sales and store traffic. But how profitable can having associates pick, pack and stage-for-pickup or deliver really be?

In fact, the unlock in this business model is in the merchandise strategy. I walk through the store and see upgraded product and presentations in apparel, intimates, baby, toys, home and beauty — all designed to evoke emotion. And let\’s not forget wine. The wine used to be stacked on regular grocery shelves. Now it\’s merchandised like an upscale wine shop. Momma is going to notice and she\’s going to smile. The math is: more emotion equals less commodity equals more spend and more margin. The company\’s curation of private brands is also a necessary component. The product may not add incrementally to sales if they replace a major national brand, but they definitely add margin, probably a net of 10 percentage points worth (after subtracting cost of design and development and co-op advertising dollars from the vendors).

In short, even with its recent innovations, Target still needs to spend more dollars on visual merchandising, checkout and upgrading associate engagement. The company needs to fund this and further differentiate itself by de-commoditizing key departments. If they succeed, mass will never be the same.

Last week I blogged about Walmart’s acquisition of Jet.com, for $3.3 billion. In one fell swoop, Walmart gained Jet’s revenues (estimated at over a billion dollars its first year, nonetheless unprofitable), several distribution centers, 12 million SKUs, a growing millennial — and largely urban, customer base (a more upscale cohort than Walmart’s core), 400,000 new shoppers per month, proprietary pricing software and a management team of e-commerce experts.  I called it a win-win deal for both and an accelerant for Walmart’s quest to crush Amazon.

On the other hand, Walmart rival, Target, is ramping up its e-commerce and omnichannel efforts the old fashioned way, by hiring executives from the digital world: specifically, two senior executives from Amazon and one from Apple. Target is also increasing their capital spend on e-commerce, supply chain, logistics and in-store improvements. They are committing at least $2 billion a year beginning in 2017, up from about $1.8 billion spent in 2016.

Target’s CEO, Brian Cornell, means business and is not going to be left behind. With a 31 percent increase in online sales in 2015, while disappointing against Cornell’s promise to Wall Street of 40 percent, he has upped Target’s tech spend going forward. Along with building a team of experts, they are also identifying specific strategies for improvement and growth.

In a recent Fortune article, Cornell was quoted, “So are we declaring victory? Not even close.  These are the building blocks of our future.”

Those Building Blocks

One of the most important building blocks required to perfect the omnichannel model, and thus gain a competitive advantage over pure e-commerce players – notably Amazon – is the seamless integration of the physical and digital platforms with a transactional process. This raises the challenge of total inventory transparency, 24/7, having the right inventory on the right platforms at the right time and never to be out of stock. It also requires the most efficient and effective inventory flow, once a transaction is triggered by a consumer placing an order, whether it is online or in the stores.

So when the CEO of Target declares that they have thousands of retail stores that are also distribution (fulfillment) centers, he is correct. Walmart also made such a declaration last year about its roughly 4500 U.S. stores. Target has 1795 U.S. stores. This store as DC model weighs in at a huge advantage over Amazon\’s roughly 180 distribution centers (that are not stores).

With close to 2000 stores/distribution centers, plus their own distribution-to-store centers, Target theoretically should be able to accomplish the \”last mile\” (delivery or pick up for the consumer), more efficiently, quicker and more effectively than Amazon and other e-commerce-only sites.

However, theorizing and just saying it is a heck of a lot easier than the reality of doing it, as Target is currently struggling with.  It\’s one of the main reasons that Cornell hired logistics and distribution whiz kids from the digital world.  It was also one of the more important elements in Walmart\’s decision to acquire Jet.com with its rich pool of talent.

However, in Target’s early stages of turning theory into reality, stores in a dual role as DC’s, Target is finding a lot of empty shelves in its stores because fulfilling online orders from the shelves of the stores is happening a lot faster than the flow of replenishment back into the stores from the DC’s.  Exacerbating the situation is the fact that Target has the lowest purchase minimum for consumers to qualify for free shipping among its peers: $25. Amazon requires $35 and Walmart has a $50 minimum. According to the NRF, 66 percent of consumers say free shipping is important when deciding where to shop online.  Therefore, the good news is that Target is gaining more online purchasing. The bad news is more empty shelves in the stores.

Target’s operations chief, John Mulligan told Wall Street analysts, “When you talk to our guests, the number-one pain point is that we’re out of stock.”

To get to the right balance of in-store inventory that can be rapidly replenished, Target is curating across all product categories to assess the most in-demand items and then narrow the assortments. It’s important to emphasize the need for inventory transparency and transactional data, but what’s even more critical, are the skills and expertise in analyzing the data and understanding what part of it should be acted upon, and then finally implementing the plan.

By the way, Target is not alone in this early stage of getting omnichannelling right. Every brick-and-mortar retailer is struggling through this, and the bigger they are, the more complex the solution.

Target is also adding RFID (radio frequency identification) tags to all apparel items. This is another building block for greater supply chain and inventory transparency – the ability to identify where each and every item is located in its journey from supply chain entry all the way through to check out in the store or to point of delivery to the consumer.

Further transparency will be provided to sales associates through handheld devices that are connected to Target’s main systems, which provide real-time product information and other locations for items missing in a particular store.

Finally, Target is providing Bluetooth-enabled beacons for its stores nationwide, which connect with shoppers’ mobile devices as they enter the store, pushing promotions, discounts, and additional purchase suggestions while they are shopping. It also allows customers the ability to request help from a sales associate.

Cornell puts his money where his mouth is. For the first time in its history, Target spent more last year on technology than it did on its stores, including the opening of new stores or remodeling older ones. In addition to the initiatives just mentioned, Target is improving the target.com site as well as mundane projects like improving the reliability of their POS systems, which suffered cash register freezing during checkout.

If You Can’t Beat‘Em, Join‘Em

Another move, unrelated to technology, and what some may think counter-intuitive, is Target’s decision to carry Amazon-branded products once again. I say “once again” because Target carried Amazon’s brands for several years up until four years ago when they removed them. Fire tablets and Fire TV, and Amazon Kindle e-readers are back on Target.com, and will be on its store shelves in October.

Speculation has it that perhaps, rather than competing with Amazon, why not leverage the power of its brand and draw in some of its existing customers and potentially new shoppers seeking the Amazon products. Additionally, it affords in-store consumers the opportunity to physically see and “kick the tires” before purchase.

Furthermore, Target will be able to gain incremental sales by cross-selling some of its own related products such as e-reader cases, television stands, and other accessories.

Keep Looking Over Your Shoulder, Mr. Bezos

Jeff Bezos declared early on that “day one” is every day for Amazon, and that his driving strategy was to “get big fast,” and then “bigger faster,” (convincing Wall Street that this was more important than making a profit). He was brilliant to recognize the threat of copycats, including those with “deep pockets” like all of the old world legacy giants, such as Target, Walmart and all of the others.

Well Jeff, they’re coming and coming fast. And, with each omnichannel achievement, they get faster. So, a little advice: You should continue your mantra, “get bigger faster.” And need I remind you that if you don’t start opening physical stores/showrooms, when these giants (notably Walmart), perfect the synergies awarded by a seamlessly integrated omnichannel, you might just be another competitor fighting for share of market in a market that’s growing slowly at best, and shrinking at worst.

Welcome to the end of summer.

Presidential candidate debates. Endless campaign commercials and discussions about those commercials. Fox News coverage. CNN coverage. Cartoon Network coverage.

The past month or two has been almost as bad as that most horrible time of the year when it comes to endless droning on about the Christmas holiday promotional season.

Maybe it was the mash-up of the two – similar in all too many frightening ways – that got me thinking: Who would be the presidential candidate that best personifies the country’s leading retailers? Not based on ideology or political positions – as if we could ever tell what were the actual positions of most of these jokers – but in temperament, persona and general image.

So, without regard for race, creed, color or party, I offer the following Frankensteinian matches of retailers and Republicans, discounters and Democrats, merchants and madmen.

Walmart: Hillary Clinton

The preordained leader, the biggest of the big, the one most likely to succeed…and the one with the most to lose. The Arkansas connection is just an added-bonus coincidence.

Sears: Donald Trump

The most outrageous, saying and doing one thing while really meaning something else entirely. And hanging in there far longer than anybody thought.

Amazon: Bernie Sanders

Certainly not the same old/same old, coming in from a totally different angle and shaking up the entire field in a way no one expected. Even when the numbers don’t really add up.

Target: Ted Cruz

The most brash, glitzy and erudite in the field, with a very distinctive point of view, though one that zigs and sometimes zags to fit the current situation.

TJX: Rand Paul

A completely different operating model, unlike the thinking of anybody else, they do things the complete opposite of most of the others. (Though one has been decidedly more successful than the other.)

Macy’s: Jeb Bush

The long-time stalwart in the field, at one time very much the leader but now having to slash and reinvent in ways never expected while trying to keep the excitement level up.

Kohl’s: Marco Rubio    

A new kid on the block who came on strong but seems to be hitting the wall more recently. And what you see is not always what you get.

JCPenney: Ben Carson

For a short period of time it was the most exciting player in the field, a fresh face. That turned out to be not only unsustainable but unbelievable as well.

All the other stores in the malls and out on the highways: All the other candidates.

Also-rans.

On a recent pop by my local CVS – ostensibly to fetch new heads for my Philips Sonicare DiamondClean, the Maserati of electric toothbrushes – I decided to take a quick lap through the skincare aisle to see if there was anything I simply had to have. (Always a bad idea, by the way; despite cabinets bursting with some of the world’s best anti-aging brews, this lifelong beauty junkie can always be tempted.)

At first I thought my eyes were playing tricks on me. For dozens of beloved brand-name items – Olay Regenerist Micro-Sculpting Cream, Neutrogena Rapid Wrinkle Repair, Aveeno Positively Radiant Daily Moisturizer – there was a CVS knockoff parked right next to it, gussied-up in near-identical packaging. It was staggering how many there were, and, from the boxes and bottle shapes to the verbiage, just how closely they mimicked the real deal. And of course every product sat atop a shelf sticker pointing out the savings to be had by springing for the fakey-fake rather than the genuine item.

Filling my iPhone with so many images I’m surprised I wasn’t tossed out by store security, my inner dialogue alternated between confusion and despair. “Wait, doesn’t CVS want to sell the Regenerist? Aren’t they proud to have it? Why are they shooting themselves in the foot with these imposters? This is so depressing. When did it become SOP to copy instead of create?”

As the world’s foremost Beauty Nerd, I realize I’m probably alone in my outrage. After all, your Average Josie might be thrilled to have cheaper alternatives to the pricey miracle crèmes she covets. If she can obtain similar results for less money, why not go for it?

The Knockoffs Are Getting Better Every Day

Still, that’s a big if, right? The efficacy of retailer-created product?

Maybe not, says Ron Robinson, cosmetic chemist and founder of Beautystat.com. Pestered for his opinion about drugstore skincare knockoffs, Robinson points me in the direction of an Allure magazine article he was interviewed for a while back. The piece, entitled “Beauty’s Big Secret,” explored the world of what the writer called “generics,” i.e., the cosmetics equivalent of Wegmans-brand paper towels or Stop & Shop canned yams.

According to Robinson, retailer-employed R&D types are getting better and better at sussing-out the brand-name formulas they need to replicate. And while he doesn’t suggest that some of these mad scientists possibly worked for the L’Oréals and the P&Gs of the world at some point, it isn’t much of stretch to think that’s the case.

Robinson’s advice for anyone who’s curious as to whether a generic will perform as well as its brand-name counterpart: Buy it and try it. Most stores have such liberal return policies these days, the monetary risk of shelling out for a crummy product is pretty much nil.

That’s the good news: For the most part, consumers aren’t being ripped-off by the knockoffs. Unless of course they’re literally fooled by the lookalike packaging. But if that’s the case, they can bring it right back for a refund.

If only the brands got off as easy. With the rising tide of drugstore copycat merch, the entire spirit of retailer/manufacturer partnership, — that quaint notion of “We’re in this together!” — goes right out the window. In this new world order, the mega-million dollar print and TV campaigns deployed to support major skincare launches can also become a bit of a crapshoot. Sure, they can help sell a hot product. But they can just as easily build awareness for the fake plopped right next to it.

Tarnishing Their Own Rep in the Process

The less obvious loser in the knockoff equation, however, is the store itself. (FYI, although CVS appears to be wildly, ridiculously aggressive on the knockoff front, I did also spy a handful of cosmetic copycats at my neighborhood Walgreens and Dollar General.) By pitting themselves against the best and brightest in beauty, and imitating products as close as legally possible, the retailer tarnishes its own brand.

Ultimately, what are they offering besides a lower price? Believe me, if a woman is already in the head-space of plunking down $34 for Regenerist Micro-Sculpting because she’s seen the television spots and read the reviews, she’s probably going to want the real McCoy. Beauty products aren’t paper towels and canned yams. We’re buying into the promise, the experience and the status conferred every bit as much as the results we expect to get.

I’ve railed about copycatting in this column before – specifically the lawsuits that have sprung up around Moroccanoil ripoffs — so clearly it’s a bee in my bonnet. But somehow this storewide imitation game feels worse. It’s an assault on brand after brand, product after product.

Here’s an idea: Why doesn’t CVS (or Walgreens, or Dollar General) take all that hard work and pour it into a great new line with a distinct look and point of view? House it in its own special area and give it a spotlight, rather than sneak it in onto the shelf next to a product that probably drew the customer into the store in the first place.

I thought about all this when I finally pried myself away from the skincare aisle and made my way over to CVS’s massive oral care area. There I was confronted with all manner of electric toothbrush heads, including – of course – the CVS equivalent of the heads I use on my Philips Sonicare DiamondClean.

Should I go for the 3-pack of CVS Sonic Professional Replacement Brush Heads for $26.99 or the 2-pack of DiamondClean for $29.59? I’m no math whiz, but even I could figure out that the CVS numbers were way cheaper. And at the end of the day, a toothbrush head is a toothbrush head.

Guess which pack I bought?

The Philips.

As the Holiday shopping calendar moves into prime time,  it seems only appropriate to provide a preview of  what’s in store for the next three months as we count down to that most sacred, most important event in retailing: the day after Christmas sale. Not that we haven’t already seen enough evidence of holiday promotional activity. There have been 42 known sightings of Black Friday sales ranging from Target running one on a cold winter Tuesday to the Christmas in July event orchestrated by Amazon that sucked the life out of retail sales for a day or three.

The Rockettes at Radio City Music Hall in New York have had their heels on for weeks already, with the first ads for their run breaking amidst the back-to-school season. And workers in China, India and elsewhere in the sourcing (formerly third) world have been making the stuff that will turn up under Christmas Trees since Arbor Day (by the way, that’s an April holiday when individuals are encouraged to plant trees). Against this backdrop, let’s look at how the next 90 or so days will go down…with down being the operative word.

OCTOBER 1: Macy’s, hoping to get a jump on the holiday shopping season, announces its first One Day Sale. It will run through the fourth of October.

OCTOBER 2: Target breaks its first holiday TV commercial, an upbeat, lively, feel-good spot promoting everything from pine-scented Tide to Christmas towels with a singing Alvin and the Chipmunks controlled through an app. Shoppers immediately head to their nearest Kohl’s, believing it is an ad for that store, since Target commercials never mention the store by name.

OCTOBER 3: Kohl’s itself begins its Christmas shopping promotional cycle with a new slogan – its 18th in the past four years: “Put Kohl’s, Not Coal in Your Christmas Stocking This Year.” Millennials ask, “What’s coal?”

OCTOBER 10: Keurig debuts its Kold single-serve cold beverage-making machine. Retailers are counting on it to be a big driver of housewares sales for the season.

OCTOBER 11: Retailers mark down their Kold machines by 15% after sales immediately sputter, reliving their experience with Keurig’s single-serve Vue machine a year ago.

OCTOBER 13: Jet.com sends out a press release announcing that it is still in business and that going head-to-head against Amazon was not the stupidest thing to do, ever.

OCTOBER 15: Walmart gets into the holiday spirit with its initial Made in America promotion, highlighting cookware, bed linens, curtains, towels and room-sized rugs. Shoppers flock to their stores in record numbers…to buy cheaper Not Made in America cookware, bed linens, curtains, towels and room-sized rugs.

OCTOBER 18: Sodastream, feeling the competitive pressure from Keurig’s Kold machine, announces new flavors: tutti frutti, arachnophobia and New England clam chowder.

OCTOBER 21: RH—the retailer formerly known as Restoration Hardware but that everybody in the business still calls Resto—announces that it will now simplify its name to just R.

OCTOBER 23: Bed Bath & Beyond takes its famous coupon to the next level, offering free 20% Off tattoos to all customers. Demand is strong.

OCTOBER 25: Amazon surprises the retail world with a Christmas in October one-day sale, offering dust ruffles, fingertip towels, soup spoons and Kold machines at significant discounts. All but the last sell well.

OCTOBER 28: JCPenney announces that Mike Ullman will return as CEO for the 18th time following a disappointing start to its holiday business. Ullman immediately announces that this marks a return to the old JCPenney days, and later that day the retailer issues 98%-Off Coupons at all stores.

OCTOBER 31: Macy’s, having not run a sale in weeks, breaks its first Super Saturday event. It starts on the previous Thursday and runs through the following Tuesday.

NOVEMBER 2: Every retailer in America announces a First Monday sale.

NOVEMBER 5: Kohl’s unveils another new slogan: “Baby, it’s Kohl’s Inside.” Millennials ask who’s Frank Loesser?

NOVEMBER 8: Exactly one year before the next presidential election, the new Donald Trump Home Collection is introduced, debuting in Iowa and New Hampshire. Supremely confident of his prospects, the Donald offers discounts directly tied in to his poll ratings, breaking it at 24% off.

NOVEMBER 9: Trump Home now discounted at 22% off.

NOVEMBER 11: Bob’s Discount Furniture, the heavily promotional Northeast furniture retailer known for its outrageous prices and sales, ups the ante, putting Bob himself on sale for $399.99.

NOVEMBER 14: In a shocker, Target reopens its shuttered Canadian stores, announcing it will keep them in business for the holiday season as a test.
Target president Brian Cornell hailed as a business genius for his decisive, unconventional thinking.

NOVEMBER 15: Target closes its Canadian stores. Target president Brian Cornell hailed as a business genius for his decisive, unconventional thinking.

NOVEMBER 17: Trump Home now discounted at 18% off.

NOVEMBER 19: Macy’s promotional calendar spins out its newest event: a 12-hour sale. It begins at 8am and runs through midnight.

NOVEMBER 21: Overstock.com gets serious about holiday. It runs an 87-piece bed in a bag set for $39.99… plus a free toaster.

NOVEMBER 23: Trump Home now discounted to 14%.

NOVEMBER 25: Amazon shocks the retail world with a Christmas in November sale. The only thing that’s truly shocking is that Jeff Bezos thinks every day is Christmas at Amazon.

NOVEMBER 26-27: Thanksgiving and Black Friday. Stores put stuff on sale. Like, what else is new?

NOVEMBER 28: Trump Home discount now 11%.

NOVEMBER 30: Cyber Monday. Online stores put stuff on sale. Like, what else is new?

DECEMBER 1: Macy’s announces its unprecedented first One Day Sale of December. In an equally as unprecedented break with tradition, the sale runs only two days.

DECEMBER 3: Trump Home discount cut to 6%.

DECEMBER 5: Red Bull enters cold beverage dispenser business with its Single Gulp machine. Company says all you need is one gulp.

DECEMBER 7: R, the retailer formerly known as RH that was formerly known as Restoration Hardware—but that everyone still calls Resto—announces a further modernization of its name, saying it will now remove all signage from the exterior of its stores and catalogs. It will also institute an unlisted 800 number.

DECEMBER 9: Best Buy puts every TV, DVD player, mobile phone, computer, audio system and accessory on sale. Shoppers notice no difference from any other day at Best Buy.

DECEMBER 10: Trump Home discount now stands at 2%.

DECEMBER 12: Bed Bath & Beyond announces that its cashiers are now mind readers and customers only need to be thinking about 20%-off coupons to have them honored.

DECEMBER 15: Macy’s breaks its most audacious promotion ever: The One-Minute Sale. It will run this sale consecutively for 1,440 minutes.

DECEMBER 18: With one week to go before Christmas, Kohl’s unveils its newest advertising slogan: “We Kut Our Prices More Than Any Sane Retailer Ever Has.” Millennials run spell check.

DECEMBER 19: Macy’s sues Kohl’s for slogan infringement.

DECEMBER 20: Trump Home now available at full retail price.

DECEMBER 22: In a last ditch attempt to drive business, Target reopens twice-closed Canadian operation. Target CEO Brian Cornell admitted for observation at Mayo Clinic near corporate headquarters in Minneapolis.

DECEMBER 24: Suddenly remembering that Christmas is a retail promotional event, Sears and Kmart break their first TV commercials, offering anything in the store to anybody…for anything in their pockets. Nobody notices.

DECEMBER 25: Amazon announces first-ever July in Christmas sale. Online shoppers are so friggin’ confused they respond in record numbers because it is, after all, Amazon.

DECEMBER 26:
THE REAL PROMOTIONS START.

The character of the places where we live, work, and, of course, shop, have a direct effect on our thoughts and emotions — whether we are aware of it or not. Everyone is reminded of this when we enter a majestic cathedral or a grand department store. Or when we feel so vulnerable as we navigate the unfamiliar underground passageways of a subway. It is extremes like these that make us fully aware of the impact of space and place. Our acute sensitivity to our surroundings is always influencing our behavior — often unconsciously. When we shop, every aspect of the store’s design is acting on our emotions — whether we want it to or not. One could argue that these largely unconscious emotions are no match for our conscious reasoning when it comes to guiding our shopping behavior and purchase decision-making. Right?

Not so fast. The growing and compelling body of behavioral research popularized in bestsellers like “Predictably Irrational,” “Nudge,” and “The Power of Habit” all point to the unconscious as the unseen master of our frequently irrational behavior. Nobel Prize winner Daniel Kahneman, author of “Thinking, Fast and Slow,” argues that the unconscious is firmly in the driver’s seat. He says our “thoughts and behaviors may be influenced by stimuli to which you pay no attention at all and even by stimuli of which you are completely unaware.” Surprisingly, he found that in many cases we are, in fact, more strongly influenced by such subtle stimuli when we are not aware of them. He concludes, “The main moral…is that our thoughts and our behavior are influenced, much more than we know or want, by the environment.”

Space and Place

So what does this all mean for retail design? It tells us that every aspect of the retail environment matters because it directly influences behaviors and decision-making, and, therefore, has a direct impact on business performance. Yet many retailers do not consider the effect of store design a key metric. Consumers know the power of a place intuitively just by recalling various shopping experiences. Think how specific thoughts and emotions surface when shopping at edgy Urban Outfitters versus optimistic Uniqlo; or cheerful Target versus austere Costco; or at impeccable Chanel versus flamboyant Versace.

In each case, the retail environment is made up of a multitude of design components: light, color, materials, sound, scent, the shape and size of the space, etc. There is endless variety within each design element. Think of color, for example; each color affects us differently. To complicate matters, the ways these design elements can be combined is truly infinite. So how do we begin to make sense of the design possibilities?

The Power of Storytelling

Before we choose and compose the elements of retail design, we need a story to tell. For branded retailers, that story is an expression of the brand identity. Sometimes called brand vision, brand identity is perhaps the most important concept in retail design because it serves as the inspiration for, and framework on which, a retail concept is developed. It is key to the success of the design, but brand identity is a concept that is often poorly understood.

When you or I, for example, think of the brand Burberry, various impressions come to mind. Some of those impressions might be quite simple — like its signature red, black and tan plaid or its classic trench coat. Some of these impressions might be more complex, likely inspired by some notion of Britishness. All of the impressions that exist in our individual minds can be thought of as “brand images.” They are the images that form in our minds.

Brand identity, on the other hand, is what the brand is saying, or trying to say. It is based on the brand’s core values, fundamental substance, and essential character. Brand identity is that unique combination of attributes that define the brand’s aspiration, promise or dream. It is “the center of the universe” that serves as a frame of reference and inspiration for everyone who works on the brand, not the least of all the designers of the retail environment.

So does every brand have a brand identity that can serve as the basis of great retail design?

When a painter sets out to create a portrait of a mythical figure, such as an ancient Greek god like Poseidon, Aphrodite or Dionysus the task is already halfway done because there is so much existing material with which the artist can work. For example, the nuanced character of the wine-loving Dionysus has been richly revealed in countless stories. The artist’s task is to interpret and then depict the character and temperament of Dionysus in a recognizable form. In the same way, the task of the retail designer is to interpret the brand identity and bring it to life in many dimensions. While every brand has a brand identity, it is not always as clear and accessible as the legend of Dionysus. Sometimes it is concealed, or worse, misunderstood.

Branded Environments

The character of the brand is also sometimes ignored by narcissistic retail designers who are intent on placing their own imprint on the store design, rather than serving as an interpreter of the brand. The first essential step in creating an engaging and powerful retail environment is a clearly articulated view and deep understanding of the brand identity.

Indeed, to maximize a brand’s economic contribution, all manifestations of the brand — retail environment, product, logo, promotion, service and even corporate policies — must reference the same “center of the universe.” In other words, the consumer-influencing power of the brand can only be fully realized when, as they say, everyone is singing from the same hymn book. Within luxury, we can see this coherence most clearly realized by Chanel, where a quietly elegant modern “less-is-more” sensibility is systematically applied across all product categories and promotional campaigns. The store is the physical manifestation of this sensibility where refined luxurious materials are consistently composed and applied with impeccable craftsmanship.

A different approach is Tommy Bahama’s brand identity. This brand is based on an idyllic, refined, tropical island lifestyle where one is more likely to wear silk shirts and tailored pants than Speedos and a T-shirt. The store design reflects and reinforces this vision through the use of sophisticated tropical references. In keeping with a refined aspirational aesthetic, there are no fishing nets draped across the ceiling, no faux pirate chests or Tiki totems. Instead, the island references are subtle, the materials refined — finely woven grass cloth, white bead board, wide-plank wood floors and ceiling fans. Caribbean wooden shutters are used throughout to evoke the memory of tropical sunlit days and balmy breezes. The store layouts are regular and ordered with a formality of design to reinforce the notion of a stately home. The result is pleasing, accessible and casual but also sophisticated.

At the Millennial end of the spectrum, Anthropologie’s bohemian “flea-market chic” stores have irregular layouts, mismatched furniture and fixtures, and authentic-looking folk-inspired art. The stores are celebrations of the strange beauty of imperfection. And, by inference, they acknowledge and allow you to celebrate your individuality. The coherent artisan store design actively brings the brand to life. It complements the eclectic merchandise assortment and helps imbue the product with cultural meaning — which ultimately justifies its price.

As consumers, we instinctively recognize retail environments as different as Anthropolgie, Chanel, Tory Burch, and Giorgio Armani, where the designs actively reinforce and reveal each brand’s identity. These retailers are exceptional. They have an integrated strategy that communicates their position and personality to consumers. Too many branded retailers fail to fully extend their brand identity to the store. This is a major missed opportunity. The store, as the center of the omnichannel universe, represents the most compelling opportunity to influence customer choice, leveraging consumers’ high sensory sensitivity to every aspect of their environment.

Solomeo, the Italian Medieval hill town surrounded by the fertile countryside of Umbria, is the headquarters of cashmere brand Brunello Cucinelli. The architecture, landscape, history and culture of this special place are a rich source of inspiration. This place, interpreted through a romantic philosophy, is at the center of the brand identity — which is beautifully revealed in the product and promotional campaigns — but not in the stores, which are generic gallery-like spaces. While the neutral retail environment focuses attention on the product, there is more to the brand than the product. And this is clearly demonstrated simply by looking at the rich Brunello Cucinelli digital presence. It won’t be easy, but it is time to bring this beautiful brand to life at retail.

Perhaps the most compelling reason for retailers to focus on using good design to bring the brand to life at retail is to satisfy the human heart and mind’s ongoing search for a coherent story. As humans, we are, to a fault, pattern seekers. We jump to conclusions and are wired to see a whole that is greater than the sum of the parts. Our natural instinct is to connect the dots, making visual and emotional sense of the seemingly disconnected threads of a story. Retailers can make our job as customers infinitely more satisfying by creating an integrated plan with coherent design that touches every part of our experience with their brand. It is not just pleasing; it is profitable.