Retail Unwrapped from The Robin Report

Southdale Center Turns 70; Then What?

Sanford Stein — Thu, 26 Feb 2026 05:01:00 +0000

America’s first indoor mall, Southdale Center in Edina, Minnesota, is celebrating its 70th anniversary this year. This birthday could be a litmus test of the viability of the traditional shopping mall. To ensure its relevance, owner Simon Properties just completed a $400 million renovation and new luxury wing, bringing together Gucci, Louis Vuitton, Moncler, Watches of Switzerland/Rolex, MaxMara, and David Yurman. Southdale now has the highest concentration of luxury retail in the upper Midwest and elevates the “luxe listings” above its mega-competitor Mall of America, just a few miles away. But the question remains: Will this capital infusion guarantee Southdale’s future as a 20^th-century architectural aberration in a digital/agentic age? And will chasing the top 10 percent of spenders buy Southdale and Simon time? It is by no means a guarantee of its longevity.

Can the 70-year-old Southdale Center live up to consumers’ expectations? And the answer is: Adding a new luxury wing is not a panacea for cultural relevance; today’s malls need to deliver experience and brands that are meaningful to consumers.

In the Beginning

Southdale’s origin story is a retail case study. Funded by the Dayton Development Company, it’s widely considered to be the nation’s first fully enclosed, climate-controlled shopping mall. Austrian-born architect Victor Gruen had a different vision from Dayton’s. Gruen planned for the center to be surrounded by housing, apartment buildings, schools, and medical facilities, as well as natural amenities including a lake and a park, modeled after the commerce centers of many European cities. In 1956, he was ahead of his time; the mall became…a mall.

Gruen’s original vision, now known as mixed-use development, has become the formula for the reinvention and salvation of malls like Southdale. Repositioning malls from single-purpose points of transaction into dynamic community forums promoting human interaction is the sustainable reinvention of irrelevant malls. But, given the ginormous price tag involved, there are only a finite number of malls destined for such rejuvenation. The vast majority will perish.

Class Distinctions

Between 1970 and 2002, over 800 shopping malls were built in America. Money was cheap, second-string suburbs were flourishing, and young consumers—baby boomers—were entering their prime earning years. By the mid-1990s, mall numbers peaked at over 1,500 enclosed malls. Then the tide changed. Today, approximately 700 fully enclosed malls still exist, and projections suggest that another 25 percent of these remaining centers will shutter within the next five years. Analysts predict as few as 200 survivors by the mid-2030’s.

What’s the formula for mall survival? Malls are bluntly, real estate assets. And for real estate, the age-old adage “location, location, location” is the playbook. In terms of sustainability, a mall’s age, tenant mix, occupancy rates, and institutional ownership play decisive roles in defining the ABCs of property class ranking.

The highest performing A-class malls boast premium tenants, affluent customers, and high occupancy rates (mid-high 90 percent range). Their tenants are made up of stable, national luxury and premium brands. These properties are newer or heavily renovated, located in affluent markets, typically home to Apple stores, and many are mixed-use village spaces like The Grove.
B-class malls are moderate performers, plagued by failing mid-market specialty chains. With occupancy rates of 80-90 percent, they are often found in secondary suburbs and cater to value-oriented families. They are generally older centers devoid of improvements, and many are still anchored by JCPenney.
C-class malls are the most endangered species, with 500-600 already shuttered since the mid-1990s. Occupancies are often at or below 70 percent and are considered distressed properties. They cater to highly price-sensitive shoppers with local retailers, discounters, and non-retail services.

Gruen’s Gospel

I believe the Gruen gospel of “placemaking” will ultimately determine the fate of Southdale and the rest of the remaining A-class malls. Their ownership is concentrated among a small number of deep-pocketed development and management companies, including Simon Property Group, Brookfield Properties, Macerich, (and to a lesser extent) SITE Centers, Taubman, and Unibail-Rodamco-Westfield.

It’s Simon Property Group and Brookfield Properties, who together own and control nearly half of A-class malls in the U.S. and they must concentrate on bringing their aging mall properties into the 21st century through additions, renovations, and tenant upgrades.

Southdale was completed in 1956, and the mall was just over 800,000 square feet. Today it is 60 percent larger at 1.3 million square feet. The mall’s haphazard expansion in 1963 and 1971, along with multiple renovations through the 2000s and 2010s, has resulted in a rather schizophrenic visitor experience. The current luxury wing is at odds with the rest of the mall. While the new single-level wing is upscale and polished, it feels like an island (or peninsula) unto itself. Visitors arriving through any of the mall’s other primary entrances will, no doubt, be wowed by the newly renovated center court. However, finding the new luxury wing presents a quandary, accessible exclusively via a second-level corridor.

Futureproofing an Aging Mall

All the money in the world can’t save an irrelevant mall. Some centers are destined to fail in the brutal survival of the fittest. There are core fundamentals that are prerequisites in the reimagining and futureproofing of aging malls. Will Southdale measure up?

Anchor Replacement: A mall’s once dominant department stores literally served as anchors and traffic generators, as well as magnets to attract desirable specialty stores. With their departure, similarly compelling anchor-like players must fill that role. A plethora of unlikely candidates are filling the bill today. They include high-end grocery stores, fitness and co-working centers, hotels, medical centers, “high experience” retailers, and even private clubs. Dick’s House of Sport, which has effectively replaced former Sears stores in several top-tier malls is an excellent example.

To Southdale’s credit, it has flexed its “anchor’s away” muscle. In 2019, on the site of a JCPenney store, a massive $43 million, 204,000-square-foot Life Time Fitness flagship dropped anchor. Billed as a three-story athletic resort, it included a rooftop beach club, pool, and even pickleball courts. Immediately adjacent is a 75,000 square foot Life Time luxury coworking development and indoor soccer field. Both are knockout examples of anchor replacement.

In 2024, on the site of a former Herberger’s department store, Southdale introduced a 25,000 square foot, two-level Puttshack, that bills itself as an “upscale, tech-infused” mini-golf experience. Immediately adjacent is Kowalski’s Market, a premier specialty grocer which should also generate repeat traffic. Southdale’s score: 9 out of 10.

Retail Theater and Experience Engines: The success of the reimagined mall becomes a shared proposition between landlord and tenants. In the face of unified commerce, the continued growth of online retail, augmented reality, and generative AI, brands are being forced to up their game to get folks off the couch. Becoming fully immersed in a brand’s storytelling has become the new norm. Brands like Lego, Crayola, Build-A-Bear, and Camp have become the new “play stations,” undergoing constant reinvention aimed at lengthening the customer’s visit and creating memorable moments.

With the massive popularity of the collectables market that grew by 32 percent in 2025, select specialty retailers are cashing in. Among them, CardVault, Pokémon Center, Kura Sushi gashapon, and Pop Mart. They sit at the intersection of collecting, surprise, and social sharing. They are selling sets, series, rarities, even blind boxes that foster “the chase.”

And beyond the store purchase, often viral “unboxing” follows, driving social media sharing. These brands, and others like, them populate the halls of the Mall of America, while Southdale hasn’t hopped on that brand wagon yet. Southdale’s score: 2 out of 10.

Social Interaction and Brand Activation: More than ever, brands depend on popular performers and sports figures to co-promote product drops. To that end, top malls have beefed-up marketing and event teams to facilitate high-energy, revolving events to drive traffic. Southdale currently has a considerable amount of underutilized space which could be captured for such events that bring “like-minded” groups together around a shared passion. Southdale’s score: 5 out of 10.
Food-Forward Destinations: National restaurant chains like Applebee’s will no longer cut it with new generations, proud of their food-fixated tastes. The winning ticket includes chef-driven restaurants, multicultural food halls, and experiential dining. Chef-staged, fixed-price dinners are selling out months in advance. Even ghost kitchens are being created to facilitate the preparation of Michelin Chef-quality meals for takeout or near-instant delivery to area foodies.

Southdale’s Dining Pavilion is the ghost of its former massive food court; there are plenty of tables and chairs, but light on eats. Southdale is lacking in the fine dining experience that will lure in customers. Southdale’s score: 7 out of 10.

Social Infrastructure and Walkability: Too many major malls resemble fortresses, surrounded by seas of asphalt, as vehicular access and parking overrode pedestrian friendliness during the planning process. The new mall’s viability focuses on socialization, visit duration, relaxation, and immersion. Reimagined, multi-use developments are selling off excess parking to accommodate multi-family housing. Other pedestrian-centric amenities include green spaces, walking paths, water features, community gardens, and well-equipped play areas, for folks to gather, linger, meet, and work. Southdale hasn’t begun turning parking lots into parks. With an influx of multi-family residential properties and luxury services, “greening” initiatives are a must. Southdale’s score: 5 out of 10.

Prescription

While Southdale doesn’t publish its annual visits, The Minneapolis/St. Paul Business Journal reported an 11 percent increase in foot traffic following the opening of the new luxury wing, which isn’t too surprising. Applying my “mall-metamorphosis metrics,” Southdale is an overachiever with its recent retail and lifestyle additions; however, it is clearly an underachiever in the rest of the crucial placemaking attributes. New retail is moving much faster than center owners, including Southdale, can anticipate and act on. Its relevance will depend on staying ahead of what customers want, not catching up to them.

Get Ready for GLP-1 Retail Disruptions

Sanford Stein — Mon, 24 Nov 2025 05:01:00 +0000

America’s battle with obesity and staggering diabetes rates has found an advocate in the GLP-1 family of pharmaceuticals. For historical context, while these drugs have long been tools in the treatment of diabetes, in 2021, Novo Nordisk received FDA approval for a new drug category (semaglutides) marketed under the names Ozempic for diabetes and Wegovy for obesity. And four years later, the big pharma industry has exploded, and Americans’ battle with obesity escalated to a new level.

Take the idea of a Nordstrom Local to the next level by adding stylist services, and health, nutritional and wellness coaches to help guide the GLP-1 patient along their journey. That could be the makings of a new retail disruption.

Miracle Drug?

These superhero drugs have now been prescribed to about 12 percent of the U.S. population. According to a RAND survey, women aged 50-64 show the highest rate of usage, however, younger adults aged 18-39 have shown a 588 percent increase in prescriptions from 2019 to 2024. And while there has been a “ripple effect” in the retail fashion industry size-wise, these “wonder drugs” have already set into motion a cascade effect that has the potential to reshape consumer behavior for the foreseeable future.

The GLP-1 breakthrough that began with pharma has blurred the lines among industries, including food, wellness, beauty, retail, and travel. Why? It turns out that these miracle drugs do more than just reduce appetite. It appears that they “rewire the brain” in a manner that suppresses impulsive reward-seeking behavior. Simply put, beyond lessening appetites, they also diminish the need for immediate gratification. That has consequential outcomes that behavioral scientists are studying to research how the “GLP-1 effect” is already altering long-established behavioral norms. If the outcome is a sustainably healthier life, how will a healthier population that lives longer impact retirement planning? Will life insurance become less expensive? Will employees become more productive at work? Will health technology and “reskilling” or upskilling workers become the next growth industries? These questions, and many more, are certain to trigger a seismic change in our society.

Cascade Effect

As a retail trend forecaster, I’ve long been interested in “trend convergence” as a force multiplier. Last year PWC US conducted an in-depth consumer study of roughly 3,000 people to explore the influence of these medications on lifestyles, spending habits, and consumption patterns. The results reveal that a seismic shift is underway.

The GLP-1 cascade effect is impacting retailing on multiple fronts most notably, fashion, fitness, and food. GLP-1 shoppers are reportedly more deliberate, spending more overall but with greater focus on wellness and long-term value. Impulsivity is giving way to more intentional spending. Not a good sign for trendy fast fashion.

New Look, New Clothes

Changes in body shape and size can drive the aspirational quest for an “ideal” appearance. Nearly half (46 percent) of GLP-1 users experiment with new styles, including form-fitting, activewear, and crop tops, items they previously avoided. Even moderate changes in weight require new apparel. For many, self-confidence from losing weight can drive the desire to buy an entirely new wardrobe. On a higher level, it can inspire a new relationship with self-identity, status, and self-expression.

PWC’s study revealed that apparel spending rises 4 to 5 percent around six months after GLP-1 treatment begins. While some of this reflects wardrobe replacement, many users describe renewed confidence and a desire to align how they feel with how they look. So, what does this mean for fashion retailing?

Since a GLP-1 shift in body size is matched by a greater demand for smaller apparel sizes, larger sizes are declining. Last June, Lululemon’s CEO said the brand was “out of stock in some of [its] smaller sizes.” At the same time, returns are increasing as consumers navigate changing body shapes, prompting retailers to rethink fit algorithms, sizing tools, and inventory planning.

If purchasing patterns continue to shift based on this weight loss movement, apparel retailers and manufacturers may face the challenge of accurate forecasting for demand across sizes and styles, which may no longer follow typical, predictable distribution. A new study from Impact Analytics suggests that retailers could experience upwards of a $5 billion margin hit by 2027, resulting from a misalignment in size demand and increased clothing returns.

Fitness Industry Shift

There are many complex and interconnected health, nutritional, and emotional factors involved in the successful lifelong outcome of these drugs. GLP-1’s gain in popularity is impacting the fitness and health profession. According to a report from investment banking firm Harrison Co., the total addressable market for U.S. fitness clubs, including gyms and boutique studios, is expected to increase by $6.8 billion because of more GLP-1 customers. That’s a whopping 20 percent increase, but there’s a caveat. Fitness often follows a familiar pattern; it starts with enthusiastic commitment, followed by waning attendance and often ending in membership abandonment. While the GLP-1 initial burst may taper, the shift from transactional fitness instruction to well-being guidance may be the biggest opportunity for the industry. The “gym as a clinic” model is emerging. Leaders from Dr. B, Anytime Fitness, Evolt, and Life Time have urged operators to “seize the moment by integrating coaching, care and accountability for members using GLP-1s.”

Practical Wardrobe Management

The GPT-1 wave impacts the fashion industry both near and long term. The average person stays on GLP-1 for about seven months and then regains about two-thirds of the weight loss. What happens fashion-wise when that occurs? Do dieters then have to go back and buy new clothes again? Or did they actually keep their old ones just in case? There are several related opportunities, including multiple wardrobes, thrifting, renting and high-tech personal services.

The dual wardrobe is nothing new, often the outcome of fad diets that fail. Trendy diets have short-term effects, prompting new wardrobes for new sizes. At the same time, the fear of weight regain motivates users to keep their old wardrobes.

The “hedging my bets” approach to diets makes thrifting an appealing way to afford multiple wardrobes for changing body sizes. Thrifting has been growing faster than new fashion sales over the last-half decade. It is projected to reach $350 billion globally by 2028, with the U.S. market expected to hit $73 billion by the same year. Resale can also be a godsend for GLP-1 dieters. A GlobalData consumer survey among 3,000 American adults conducted in association with ThredUp found that 58 percent of consumers shopped for clothes secondhand in 2024, a dramatic six percentage point increase over 2023.

Renting is another way dieters can de-risk the wardrobe costs of body shifts. Clothing rental companies are also seeing a greater demand for smaller sizes. Last year, Rent the Runway CEO Jennifer Hyman told The Wall Street Journal that more customers were switching to smaller sizes than at any point in the last 15 years. According to Future Market Insights, the rental market is expected to grow from $2.6 billion in 2025 to $6.4 billion by 2035. For GLP-1 patients trying to manage “shapeshifting,” an under $100 per-month wardrobe revitalization makes economic sense.

New AI technologies are poised to step in to help dieters find the right fit. Beginning with dynamic sizing tools and virtual try-ons, a customer can see herself in a resized wardrobe. From a personal service perspective, retailers may need to offer styling support, flexible sizing, and inclusive messaging to help consumers navigate post-weight-loss identity transitions. Take the idea of a Nordstrom Local to the next level by adding stylist services, and health, nutritional and wellness coaches to help guide the GLP-1 patient along their journey. That could be the makings of a new retail disruption.

Will Warby Parker Succeed in Besieged Target?

Sanford Stein — Thu, 18 Sep 2025 04:01:00 +0000

Target has been in the news, and not for the best reasons. But it may have gotten closer to the red bullseye with one interesting move. In late February, Target announced a partnership with Warby Parker for shop-in-shops in selected Target locations. I recently visited the second such unit to open in suburban Minneapolis. There will be five other shops for this initial launch, including Willowbrook, IL; Brick, NJ; Columbus, OH; and Exton, PA.

In the amorphous Target environment, a separate door clearly demarcates Warby Parker from its host store and makes its customers and staff feel safe, secure -- clearly in a WP space and place untarnished by a soulless big-box interior.

Brand Control

The Warby Parker-Target concept is more akin to an in-line mall store than the more integrated Target and brand models such as Ulta, Apple, Levi’s, and even Caribou Coffee. Following the retail licensing/concession model, Warby-at-Target comes complete with a glazed storefront and its own door. It’s about total brand control.

Warby understands its extraordinary brand value is a direct result of its obsessive control over every brand touchpoint throughout the customer’s ever-evolving “path to purchase.” Every aspect of the WP brand is holistic and speaks in one voice, including its website, marketing, product design, store design, and great personal service. In the amorphous Target environment, a separate door clearly demarcates WP from its host store and makes its customers and staff feel safe, secure — clearly in a WP space and place untarnished by a big-box soulless interior. It’s a smart marketing and design strategy.

This dedication to brand integrity has enabled Warby Parker to evolve from one of the most dominant digital native retail brands to becoming an equally successful unified commerce brand with over 300 retail stores in the U.S. and Canada. Now WP is reaching out to a new audience, more mainstream by definition, managing and operating the Target shops with its own trained Warby Parker staff, thereby ensuring their high value offering.

Scaled Design

From the point of view of a recovering store designer (me), the store is a smash hit. It is nothing less than a slightly downsized, impeccably merchandised retail offspring. Warby Parker’s fleet of stores ranges from this tidy 1,000 square foot Target shop-in-shop to 2,500 square foot stores, with an average footprint of 1,600 square feet. At Target, Warby Parker’s full product and service offering includes glasses, sunglasses, contacts, eye exams and vision tests; there is an exam room for their on-site opticians.

From the product SKU perspective, customers won’t feel short-changed. The WP design team has managed to shoehorn in 18 bays of eyewear, comparable to larger stores in the chain. Overall, there’s one problematic element: The shop’s aisles are ample for normal traffic trying on and buying, however, one or two massive Target shopping carts will blow the flow.

By the Numbers

While there haven’t been any disclosures on the financial terms underpinning the partnership, Warby Parker is likely paying Target for space and retains most operational autonomy. So, who stands to benefit from this partnership the most?

Target stores currently generate approximately $438 per square foot in annual revenue. This figure reflects performance across their nearly 2,000 U.S. locations and includes both general merchandise and specialty categories like apparel, beauty, and home goods.

Meanwhile, Warby Parker reportedly generates around $3,000 per square foot annually, putting it in the same league as high-performing retailers like Apple and Tiffany. That’s a lot more revenue power packed into a small space. I suspect the speed of the actual store rollout may be impacted by how well these initial stores perform, but I think this could be a win for both parties.

Adios Ulta

The elephant in Target’s room may well be cosmetics. The WP launch runs in tandem with Ulta Beauty’s announced decision to end its four-year partnership with Target, with shop closures expected by August 2026. Coincidentally, the 1,000 square foot Ulta spaces match the new Warby-in-Target footprint. Longer term, Ulta expects its “divorce” decision will boost traffic and revenue to its wholly owned stores. It has been reported that the Ulta-in-Target stores generated royalty revenue well below one percent of net sales over fiscal 2024.

In a recent interview, Ulta’s president and CEO Kecia Steelman, was asked about plans to increase its store count to compensate for pulling out of Target; she responded: “I’ve got plenty of stores where I could pick up that volume in existing store format. So, there is no need to suddenly be more aggressive and open stores because we are moving away from the partnership with Target.” Okay then!

The Vision Prize

Optical is not new for Target. It first partnered with Luxottica to open Target Optical shops inside its stores back in 1995. And EssilorLuxottica renewed its licensing agreement with Target in February 2023 for the 580 Target Optical stores it occupies. Like the Warby Parker arrangement, those eyewear and vision care departments are operated and managed by Luxottica Retail North America. EssilorLuxottica is the world’s leading optical retailer, owning and operating LensCrafters, Sunglass Hut, and Pearle Vision, along with manufacturing and/or licensing nearly two dozen of the top eyewear brands, including Ray-Ban, Oakley, Persol, Oliver Peoples, and the list goes on.

According to Target’s official press release, the new Warby Parker shops will open in locations without existing Target Optical offerings. Duh.

Who Wins in the Target – “Warby Parknership”

Retail partnerships of this nature have been going on for eons. Department stores began subletting space to cosmetics companies in the early to mid-20th century, but the practice became especially widespread in the post-war retail boom of the 1950s and 1960s.

Best Buy has accelerated the “store-within-store” model through the plethora of tech brands that pay to play in their digital playground. However, the win-win nature is not always evenly matched. And as far as the Target-WP deal goes, I believe Warby Parker could be the big winner; here’s why:

Captive Audience. While it’s unlikely that WP expects “destination visits” to Target for the sole purpose of trying on or buying their eyewear, the brand exposure and broadening their audience is a sure bet. Whether it tarnishes the brand for existing WP customers remains to be seen.
Cost Savings. In comparing the sky-high costs of tenant buildout in a typical regional mall or freestanding street location, combined with associated common-area maintenance (CAM) costs, with that of a more moderate Target shop-in-shop, the latter is the winner.

Online/In-Store Synergy – It has been well established that the addition of a physical store to a digital-first brand reduces customer acquisition costs and drives incremental online traffic. The Target move increases Warby’s zip-code coverage without committing to long-term mall leases. With Warby Parker’s highly refined digital marketing machinery, the benefits include a robust, new data trove.

Will Target Diminish WP?

Even with the potential positives for WP, one might question what the long-term strategy here is (if there is one). The WP partnership is a gamble for the brand that has made its mark based on its popularity with young, hip customers. Is that a good match with the typical Target customer? Will it confuse Target’s shopper who is not necessarily a WP customer, let alone aware of the brand? And what about WP’s shiny, clean interior design in Target’s tired big box stores?

Warby Parker started life as a niche brand offering and has broadened its marketing strategy as it has scaled. The skeptic could ask, “At what price to brand integrity is scaling to the masses?” On the other hand, 79 percent of Americans wear eyeglasses. That market is clearly irresistible.

Joann’s Bankruptcy: A Failure of Imagination

Sanford Stein — Mon, 19 May 2025 04:01:00 +0000

Joann Fabrics and Crafts has fueled the imaginations of its loyal customers for eight decades. Regrettably, now that it has become just another moribund brand it’s sad to think that Joann’s leadership simply lacked the insight and imagination to reshape the brand to compete and prosper in the “new world” of unified commerce. But that’s what happened, along with bankruptcy.

With the advent of unified commerce, increased labor costs, and ever tighter margins, Joann wasn’t paying attention to their pain points. Joann desperately needed “fresh eyes” and out of the (big) box thinking to stay fresh, relevant and competitive.

Keeping Up With the Times

The very nature of the traditional store is being challenged by ecommerce, economic conditions, supply chains, and changing demographics. Many leading retailers have learned on the fly, updating formats and embracing new technology while still prioritizing the traditional qualities of the customer engagement that built their brands. Regrettably, Joann remained knotted and tied to outdated sales and distribution formats, exacerbated by disengaged and misdirected leadership.

A Management Migraine

At the height of the pandemic about four years ago, interest in crafting surged, then sank as stay-at-home and work-from-home orders ended. Competition and massive price cutting from rivals like Hobby Lobby and Michaels, along with ecommerce retailers affected Joann’s performance. Additionally, executives, particularly at higher levels, reportedly lacked a deep understanding of their customers’ needs and how they used Joann’s products.

CEO Wade Miquelon who joined Joann Fabrics in 2016 as Executive Vice President and Chief Financial Officer and was later appointed interim CEO in 2018, became President and CEO in February 2019. Previously, Miquelon spent 16 years with Proctor & Gamble, then a short stint at Tyson Foods, before joining Walgreens in 2008. While there, he became embroiled in a partnership with the blood-testing company Theranos and continued to support Theranos founder Elizabeth Holmes even after the Wall Street Journal exposed the company as a fraud. The Theranos chapter along with Miquelon’s lack of craft industry cred clearly questions the Joann’s board of directors decision-making acumen.

On Miquelon’s watch, despite leading Joann’s 2021 initial public offering, the company experienced notable losses between 2020 and 2023, including revenue down 22 percent, profitability down 12 percent, and a margin reduction of a staggering 1,500 basis points from a plus 5.6 percent to a minus 9.5 percentage points.

Under Miquelon’s leadership, missed revenue and adjusted forecasts became the norm. Miquelon departed Joann in May 2023, and the company filed its first bankruptcy in March 2024. It was subsequently delisted from NASDAQ in April 2024.

Dysfunction Reigns

After Miquelon’s departure, the board drew heavy criticism for not finding a replacement CEO to right the sinking ship. Instead, it appointed Chris DiTullio, Chief Customer Officer and Scott Sekella, Chief Financial Officer as co-CEO leads, a questionable move at best.

Now under private ownership, Joann secured $132M in new financing, which didn’t last long considering their burn rate at the time. Once again, Joann’s actions or inactions were quite telling.

In 2024, Standard & Poor’s (S&P) Global Ratings marked 34 bankruptcies in consumer discretionary and retail markets. The commonality shared by a majority of those bankruptcies was closing underperforming stores; an outlier, Joann’s did not follow that pattern.

Meanwhile, the company faced significant inventory problems, including overstocking and unexpected production issues, which were exacerbated by untenable store-level labor problems severely impacting both sales and financial stability.

Board Overboard and a Hail Mary

In June 2024, Joann named Michael Prendergast as its acting CEO, while DiTullio and Sekella resumed their previous roles. A new board was named “as Joann moved forward as a stronger private company,” according to press releases.

Joann’s last gasp was a “reimagined” brand campaign that repositioned JOANN as “JO-AND.” They spent Hail-Mary money on commercial spots, influencer relationships and social media campaigns, intended to inspire the next generation of creators.

Such an effort would be considered a long-range strategy, not the tactical triage Joann’s needed. As a result, Joann filed its second Chapter 11 bankruptcy in January 2025, just nine months after their first.

Labor Pains

An insider’s perspective on Joann’s unraveling was revealed by an anonymous former general manager; it was enlightening but not particularly surprising.

The habitual (overt or accidental) communication breakdown between corporate decision-makers and store-level operations clearly played a role in Joann’s undoing. We’ve seen this movie before when a legacy brand’s “culture of caring” goes by the wayside. The pain points described by the GM were plentiful:

Minimum hour model. In recent years Joann’s stores were run on a “minimum hour model” which meant they were being run with just a two-person crew in an average store size of 22,500 square feet.
Labor daze. Given the lack of labor, the most any store could do was cut fabric, check customers out and maybe manage to return a few bolts of fabric back onto the floor. The staff was required to skip breaks, even lunch in their attempt to keep up.
Overstocked stores. With the weekly push of product, usually 200 boxes on average, storerooms were as much as three months backlogged on product that needed to get to the floor. Storerooms became borderline dangerous to walk through.
Tangled web. While the website might say a particular SKU was in stock, the shorthanded staff couldn’t possibly leave the floor and wade through boxes in the storeroom to locate an item.
Lane change. To add additional fuel to the fire, the company introduced home goods and decorations. Besides diluting the brand, it further compounded the in-store merchandising problem, adding to losses.

Failure of Imagination

In my over four decades of experience as a retail planner and store designer, I’ve had the good fortune to work with many outstanding retail leaders. One quality they all shared was the need for a regular “walking around sense” of what was happening in their stores. This was despite (good or bad) data received through divisional reporting. Even retired Costco CEO Craig Jelinek was an advocate for regularly getting out of the office and onto store floors. Apparently, this was not Joann’s leadership priority.

Beyond seeing firsthand what works and what doesn’t, in an age of unified commerce and lightspeed industry change asking questions and having “fresh eyes” on any situation is imperative to a sustaining brand.

Non-Transformative Thinking

With the advent of unified commerce, increased labor costs, and ever tighter margins, Joann wasn’t paying attention to their pain points. Joann desperately needed “fresh eyes” and out of the (big) box thinking to stay fresh, relevant and competitive.

Given the sizable square footage accommodating over 100,000 SKUs across fabrics, sewing, crafts, needle arts, home décor, paper crafts, and painting supplies, the “minimum hour model” was untenable. Legacy thinking prevailed and there appeared to be little impetus for change. Reimagining the entire fabric display methodology could have cut costs and boosted efficiency and productivity. Giving a “boot to the bolt” by introducing changeable modular fabric display boards in the stores would have significantly reduced the amount of floor space required to display the same SKUs. Nothing new here. Retail flooring stores morphed from showing stupendous stacks of carpet rolls to displaying small samples a half-century ago.

The new display methodology (possibly augmented by take-home swatches) would have trimmed store sizes without reducing variety. More importantly, it would have freed sales associates to better serve customers. Further, removing the bulky bolts from store floors would improve site lines, resulting in a more manageable, customer-friendly environment.

AI and Automation

Jettisoning fabric bolts from stores into small regional satellite fulfillment centers would have facilitated a more automated and accurate “cut to quantity” order processing. Eliminating duplicate product SKUs from multiple area stores and consolidating the stock into these centers would have significantly trimmed inventory and expedited processing while providing the customer “store-to-door” same-day delivery.

Satellite processing would cut down on waste while improving inventory control and margins. Also, piggybacking AI-enabled data collection further up the food chain would provide more personalization. It also opens the door to the new generation of “agentic AI” further cementing loyalty and improving customer lifetime value.

Loss of Community and Connections

There has been an overwhelming customer outcry by the sewing and crafting community since the Joann liquidation announcement. In many ways, it has been perceived as more consequential, even traumatic, than just another well-known brand being lost.

For the legions of sewers, creators and makers losing Joann’s meant losing a social network. Loyal customers relished coming together for in-store events and sewing classes as well as connecting and proudly sharing their latest handiwork across social media.

That kind of brand equity took years if not generations to build. It took a relatively short amount of time for the short-term thinking and nearsighted management to rip up that precious fabric and destroy generations of loyalty and equity.

Urban Outfitters Faces a Tough Balancing Act

Sanford Stein — Thu, 03 Apr 2025 04:01:00 +0000

Retailing has never been more challenging and is only going to become more complex. While seemingly endless numbers of specialty fashion retailers have been relegated to the growing list of defunct brands, Urban Outfitters has been a survivor.

Imagine Reclectic rolling out special weekends of “make-tailing” events. Reclectic identifies local fashion designers and stylists with abroad social media presence to take center stage in the store. Customers are invited to collaborate with the stylists with a vision in mind to “reimagine” clothing.

Urban Outfitters Resilience in Action

Urban has had their share of missed quarterlies and fashion faux pas, but they’ve been able to regroup, identify problems, and fix them. I attribute this to the continuity and vision of their brilliant founder and CEO Richard Haynes, who is still very much in charge. Case in point: Contrary to the disappointing fourth quarter 2024 results reported by many retailers, Urban Outfitters Inc.is an exception. During their February 26^thearnings call it beat analysts’ estimates on both top and bottom lines. But there’s more behind this story: Urban’s namesake flagship brand continues to be a drag on the P&L sheet although things are slightly improving. Meanwhile, Free People, its sub-brand FP Movement, Anthropology, and rental brand Nuuly have been doing the heavy lifting and profit earning. The total unit count of all flagship brands, Anthropology, Free People, and Urban Outfitters numbers 742 stores as of January 2025.

Identity Hinge Point

Urban Outfitters brand has been experiencing an identity crisis for quite some time. During an October 2024 earnings call, the company candidly admitted it didn’t know how to market to the demographic that made it a household name — young people, specifically Gen Z. That’ s a pretty dramatic smoke signal for help. Critics have noted that the brand lacks “cultural awareness” and did not adopt to the evolving shifts in attitudes with millennials, once their key cohort, and Gen Z.

The Elusive Next Gen

Gen Z is full of behavioral contradictions. Three years ago, TRR Gen Z expert Jasmine Glasheen pointed out, “Despite all the data supporting Gen Z’s overwhelming interest in sustainability, as well as their enthusiastic support of resale and the circular fashion, they (also) appear stuck on fast fashion, the arch enemy of sustainability.” And three years later, they are still pragmatic shoppers.

And, if that weren’t enough, retail brands are now dealing with “No Buy 2025” the social media meme promoting Gen Z’s “underconsumption.” Younger consumers, especially in the U.S., have been embracing this burgeoning movement which encourages people to buy as little new merchandise as possible. This is sure to increase C-suite antacid intake at Urban Outfitters and other fashion retailers.

Three-Prong Strategy

Urban Outfitters is now staging a turnaround, with the ambition of finding the success of Abercrombie & Fitch with three key strategies aimed at profitability. First, like many other retailers, Urban Outfitter believes their stores are too large and must be “right sized” from around 10,000 square feet down to the 6,000 to 7,000 square foot range. Second, Urban’s core demographic has been moving out of dense urban locations to outlying suburbs and exurbs. Further, Urban’s Outfitter’s founder and CEO Richard Hayne suggested that the brand is “now focused on acquiring new customers.” He elaborated by discussing strategies such as expanding product lines, improving store productivity, and leveraging their subscription service, Nuuly.

Brand Master and Merchant King

There are many factors that differentiate Urban Outfitters from other specialty retailers that went from becoming a sensation to ultimate elimination over time. They included some of the 20^th century’s most revered retailers, founded by merchants who were passionate about what they sold, who they sold to, and how their customers were treated. Names like Ben Marcus, of Neiman Marcus, Charles Lazarus of Toys “R” Us, and Sid and Max Kohl, founders of Kohl’s come to mind. Many lost sights of their company’s missions or their founders’ visions. Some succumbed to over-expansion, changed ownership, or simply lost touch with their customers.

Building Success Incrementally

This has not been the case with Urban Outfitter’s Inc. Hayne has been the “brand master” from the start and remains so today. He opened his first apparel shop near the University of Pennsylvania in the 1970s with $4,000. Today, Hayne still controls nearly 60 percent of the URBN stock and is personally worth over $2 billion.

Hayne tends to his retail garden ecosystem with greater care than most. He is also very pragmatic and evaluates options carefully; Urban’s rental brand extension Nuuly being a fitting example. Now Urban’s fastest growing division, Nuuly debuted a decade after two digital-first pioneers embarked on the fashion rental business.

Learning From Other’s Mistakes

Rent the Runway was founded in November 2009 as a platform for renting designer apparel and accessories, revolutionizing how people access fashion. Seen as the newest shinny object by the venture capital community, RTR raised over $300 million in twelve rounds of funding but struggled to achieve profitability. The company has consistently reported net losses, with a net profit margin of -26.6 percent as of October 2024.

Stitch Fix was founded in February 2011 as an online personal styling service, blending technology and human expertise with rental options for its curated clothing boxes. It experienced rapid growth and went public in 2017 achieving a valuation of over $1 billion. However, it too has faced declining revenues and customer losses in recent years. and its profitability remains a key challenge. It reported net losses in fiscal years 2023 and 2024.

Urban ‘s Nuuly “no buy” subscription rental service launched in May of 2019 and had a big advantage out of the box. A perfect complement to Urban’s brand family and ecosystem, it tapped into the growing demand for clothing rental services as well as aligning with Urban Outfitters’ focus on creativity and self-expression.

A Vertically Integrated Model

Nuuly rents subscribers’ apparel from its own brands as well as from over 300 third-party brands, including well-known labels, and emerging designers. It’s promoted across Urban Outfitters, Inc.’s portfolio of brands, including Urban Outfitters, Anthropologie, and Free People and is featured throughout the 700+ store chain and online.

As Urban’s fastest growing brand, Nuuly is experiencing a 56 percent sales jump in the fourth quarter. They also added 20,000 active subscription members, for a total of 300,000. Best of all, Nuuly celebrated its first profitable full year and is aiming for $500 million in sales by the end of 2025.

The key differentiator between Urban’s approach to rental and the others is that Nuuly is vertically integrated into the Urban ecosystem. Additionally, in contrast to digitally native Rent the Runway and Stitch Fix, Nuuly began life as a unified commerce (AKA omnichannel) brand, which contributed both traction and profitability that has illuded the others.

Challenges as Opportunities

However, Nuuly’s success is not without hiccups. It faced the challenge of finding an environmentally responsible way to dispose of goods once they are no longer rentable. In response, enter Reclectic, the retailer’s vertically integrated solution that pairs thrifting and resale. Reclectic offers eco-conscious solutions for products that can’t be sold at retail. Their tagline: “new/thrift. high/low. apparel/accessories,” is a clear attempt to future-proof the brand positioning.

The at-least 60 percent off retail merch mix includes “’gently used” products from Nuuly along with product samples, slightly damaged merchandise, and products that have not sold from the retailer’s other brands. Their first store debuted as a pop-up in the backyard of the retailer’s Philadelphia corporate headquarters. The 40,000 square foot “test concept” launched in August 2023 and received rave reviews, plenty of Tik Tok attention and sold out most of its merchandise in its first 24 hours.

A second larger 100,000 square foot store, the first to feature the Reclectic brand identity opened in Tempe Arizona in late October 2024, and the third unit opened in Gurnee Mills Mall outside of Chicago last November. In early February 2025, the newest Reclectic opened on the outskirts of Charlotte in Pineville, NC. Fueled by a ton of TikTok and Twitter social media buzz, hundreds of anxious shoppers arrived in the early hours and assembled in block-long Disney-like queues to become part of Urban’s newest brand phenomenon. Store number five is set to open soon in Dallas.

More to Come?

Reclectic is threading the needle in a novel way. It’s undeniable that it’s positioned somewhat like a factory outlet store but is doing it much better. It sidesteps the stigma of “blowout” sales in Urban’s flagship stores, which insures better margins. More importantly, Urban Outfitters is painting a sustainability scene in the process. Nuuly in tandem with Reclectic has the potential to become Urbans’ next big growth engine.

They’ve got the goods. With over 700 stores and a vital ecommerce operation they will continue to be an endless supply of merchandise including past rentals, end of season and overstocks, as well as online sales returns to keep multiple Reclectics stocked.
Growth on the cheap. In the retail scheme of things, Reclectic stores are inexpensive to open. Compared to the substantial and costly leasehold improvements required to fit out any of Urban’s flagship stores, opening a Reclectic is a low-budget affair. They also appear to be targeting less expensive real estate than their flagships occupy.
Trending trifecta. 1.) At a time when companies like TJX seem unstoppable, Reclectic helps stretch budgets, while providing the irresistible “treasure hunt.” 2.) The brand provides Nuuly an eco-fashionable resale solution, and a vertically integrated “close-out” vehicle along with Gen-Z social media buzz. 3.) Color-coded tags identify items free of any defects, pre-loved, like-new, or in good condition, and merchandise with minor damage. No changing rooms, no returns. Reclectic recommends clothes to “hit your fit” because all sales are final.

A Little Retail Theater, Please

The internet has won the commodity retail sales race. For stores to remain viable they must provide customers with more than just merchandise to bring them in and keep them coming back.

Imagine Reclectic rolling out special weekends of “make-tailing” events. Reclectic identifies local fashion designers and stylists with abroad social media presence to take center stage in the store. Customers are invited to collaborate with the stylists with a vision in mind to “reimagine” clothing. Together, they create a truly personalized, one-off Reclectic original. And of course it’s all being livestreamed online to fashionista followers. It’s upcycling meets immersive retail theater.

How Major CPG Brands Have Brought on Their Own Demise

Sanford Stein — Tue, 17 Sep 2024 10:00:00 +0000

Terms like “private label, privately owned, generic and direct-to-consumer brands” are popular buzzwords among both retailers and consumers. Yet their roots go back over a century. What’s new is that their meaning in the retail price/value paradigm has been transformed over recent decades. What’s perplexing is whether the major Consumer Package Goods (CPG) brands have been playing into private label brands’ hands by flexing their “elastic pricing powers” only to end up losing market share.

Costco, Sam’s Club, HEB, Walmart, Dollar Tree, Lowe’s and Kroger all experience more than a quarter of their overall sales volume coming from private label products.

A Brief History

When most Americans still resided in rural farming towns, they depended on the local general store for their daily consumables. Everything else could not be found in either the Sears and Roebuck or Montgomery Ward catalogs. Besides produce, meats and canned goods these establishments also sold generic dry goods including bulk items like sugar, flour, coffee, and tobacco.

Private brands are nearly as old as the pioneering 19^th-century grocery chains. First National Stores (Finast) is the first U.S. grocery chain launched in 1853, followed closely by The Great Atlantic and Pacific Tea Company (A&P) in 1859. Both had their roots in the Northeast, and each introduced private label brands by the 1920s. But in the country’s heartland, Kroger launched in Cincinnati, Ohio in 1883, and was one of the first U.S. grocery chains to introduce its own branded products in 1904. Roundy’s took root in 1872 in Milwaukee, WI, and The National Tea company opened its first store in Chicago in 1899. Both introduced private-label products in the early 1900s when they came to the realization that their customers would have more trust in goods bearing their own brand names.

The turning point in private label came in 1984 when Loblaws in Canada launched President’s Choice as the first quality store brand. They also licensed it here in the U.S. to other retailers including D’Agostino’s. A&P then followed by launching its Master’s Choice brand. What then ensued were other retailers — most notably Trader Joe’s and ALDI who followed suit with higher quality store brands.

Fast forward to today where Walmart, Target, and Whole Foods 365 have all increased their assortment of store brands toa higher quality level. Just recently Amazon launched Amazon Saver their new private-label food line.

Inequality On Aisle Five

Regardless of the major grocery chains’ private label brands’ customer acceptance, they existed in the shadows of the big CPGs. The advertising, promotional, and distribution muscle power behind the Heinz, Hunt’s, Kellogg’s and Kraft’s of the CPG world put them in the driver’s seat and into the grocery cart.

This power of scale has only been amplified through the massive multinational consolidation taking place among the superbrands like Procter & Gamble, Unilever, Nestle, PepsiCo, Tyson Foods, Anheuser-Busch InBev, and others who hold the pricing power levers in the industry.

And while the 21^st-century store has evolved considerably, some things have not. There has always been a ginormous gap between the grocers and GPG’s profit potential. Grocers measure margins in pennies, while multinational CPG brands exist in a completely different margin cosmos.

This inequity was only magnified during the pandemic and post-pan periods which saw multinational CPG brands rake in record profits. Some economists have argued that large food and consumer goods companies took advantage of pandemic-era disruptions. Economist Isabella Weber at the University of Massachusetts in Amherst called it “seller’s inflation.” Others refer to it as “greedflation.” Meanwhile, on the sell-side, both grocery retailers and consumers paid dearly due to inflation-fed price hikes, out-of-stocks and withering margins.

Squeeze Play

The grocery industry’s response to imposed massive price increases was bipolar, to say the least. Tone-deaf CPG brands continued their quarterly earnings tropes of controlling price elasticity to hold or boost profits. Meanwhile, most grocery chains felt an obligation to become “shock absorbers” for their loyal customer base resulting in even greater margin cuts.

Once costs plateaued, many major retailers like Walmart and Target offered customer relief with additional price cuts. This was in marked contrast to the CPG’s distress redress embodied in shrinkflation and cutting the size of package content. This cynical marketing strategy only enraged customers.

Knowingly, or not, CPG brands were trading short-term profits for long-term sustainability and suffered the unintended consequences of accelerating the preference for private-label products. And we continue to witness customers doubling down on trading down.

The CPG market share loss has become owned brands’ gains. Further, the convergence of changing attitudes around the price/value paradigm, along with heightened sensitivity around shared brand values, suggests a further deterioration of CPG market share could be in store. Put simply, this is a trust issue. And breach of trust is a death knell.

Store brands are also a generational thing. For the parents of boomers, buying store brands (and using coupons) was looked down upon as they signaled that “you couldn’t afford” the name brands. Today, especially with Gen Z and millennials, there is no stigma attached.

The Rise of Generics

Another cost-saving alternative began to emerge in the late 20^th century: generic brands also referred to as “no label” goods. These gained popularity in the United States during the late 1970s and early 1980s during a period marked by high inflation.

Around 1977, generics appeared in supermarket chains including Chicago-based Jewel, and Canada’s Loblaw. Their austere, ordinary black-and-white packaging bore oversized type fonts, not unlike Western movies’ most-wanted posters. These generic labels screamed no-frills prices with simple Corn Flakes, Mayonnaise, and Peanut Butter descriptions with little additional copy. They stood out juxtaposed with the CPGs’ “Mad Men” era’s over-the-top design, which of course received top billing in the stores.

But those black and white and yellow and black labels were slapped on products that were of lesser quality than the store’s normal private label. For example, the store-brand canned peas would be green in clear water, the generics would be brown peas in cloudy water. That’s why the generics were a flash and didn’t stay on the shelves. People still had to eat, and the quality was so bad that even having a great price wasn’t enough.

Yet today the minimalist graphic treatment broadcasting authenticity and trust is what draws today’s customers to the latest and greatest high-demand direct-to-consumer brands in everything from cosmetics to home goods.

Clear Results

The levels of success that top-tier retailers have enjoyed through owned brands have been nothing short of legendary. According to Numerator’s most recent Private Label Brands Tracker, private label items accounted for a leading 33.1 percent of sales in the club channel (e.g., Costco, Sam’s Club), followed by office 30.3 percent, mass (e.g., Target, Walmart) 28 percent, home improvement 26.8 percent, and pet 25.5 percent. In fact, Walmart sells five of the top 10 private label brands by household penetration.

Walmart brands had over 50 percent U.S. household penetration in the past year and was the only retailer to exceed that watermark. Among 20 of the largest U.S. retailers, Aldi and Trader Joe’s rely most heavily on private label products, with their owned brands accounting for 80 percent and 69 percent, respectively, of their overall sales volume.

Costco, Sam’s Club, HEB, Walmart, Dollar Tree, Lowe’s and Kroger all experience more than a quarter of their overall sales volume coming from private label products. In contrast, only three percent of Amazon’s sales volume is attributable to private labels.

Costco’s Kirkland brand exists in a category all its own, having generated $56 billion by the end of its 2024 fiscal year. In other words, the Kirkland brand generates more annual revenue than either Nike or Coke. With Kirkland’s over 550 items, their super-loyal consumers are responsible for nearly 30 percent of the entire private label market.

What’s Your Brand Stand?

The rise in popularity of private labels, owned brands, generics, even direct-to-consumer brands cannot be taken out of context of the larger, complex discussion of retail’s 21^st -century evolution. Nor does it spell the demise of legacy brands.

That said, the “big-is-good” mindset, once considered to be a differentiator and advantage to the leading CPG brands, is now anathema to next gen thinking. The values of these coveted demographics, millennials and Gen Zs, better align with today’s smaller specialized brands built on authenticity, originality, transparency, and personalization.

Other trends detrimental to many major CPG brands are the rapid growth and unique tastes of multiethnic communities, an increased emphasis on regionalization and the rise of direct-to-consumer brands. These trends tend to favor small startups and young entrepreneurs pursuing new niches, often built around “tribes” of loyal followers. The winning hand for all these business types is their ability to prosper without having to build massive scale as the big CPGs.

Can There Be Unified Commerce with Only One Store?

Sanford Stein — Tue, 13 Aug 2024 10:00:00 +0000

Wayfair’s newly opened 150,000 square-foot flagship store in upscale Wilmette, Illinois has created much speculation about their future brick-and-mortar plans. Does the retail prototype foreshadow a major unified commerce push, or is it simply splashy retail theater to help mitigate Wayfair’s institutional investors’ anxiety about the company’s lack of profitability?

Wayfair needs to demonstrate a path to profitability, which has eluded them almost from the start. However, developing a cohesive sustainable offline strategy to complement their complex online model is a complex undertaking; one not readily measured by near-term metrics.

While the megastore is the first bearing the signature brand banner, Wayfair has eight other physical retail stores representing four other “Exclusive Brands.”

An Immersive Brand Experience

From a purely objective point of view, the Gensler-designed flagship does deliver on the essence of experiential retailing, the yin to ecommerce’s yang and many retail watchers have raved about the store’s overall design.

My Robin Report colleague Warren Shoulberg praised the over-the-top concept, which ticks all the boxes on great branded environments. He also chided Wayfair over its “cat and mouse” game played with the press regarding future physical stores.

Wayfair on the Record

When I put the question of Wayfair’s brick-and-mortar plans to a company spokesperson, the email response was: “While we expect ecommerce to continue to grow strongly, physical retail will remain a primary channel for consumers in this category. As for future plans for physical retail, we do expect to have a portfolio of stores in the U.S. over time.”

This echoed another Shoulberg comment: “There’s only one thing worse than opening new stores too quickly: that’s opening them too slowly.” And while I share his sense of urgency, my view is tempered by the recent history of digital native brands’ migration to brick-and-mortar retail. It has been a tale fraught with challenges and missteps; more on that to come. So, what’s the best path forward for Wayfair, and are the fundamental issues magnified by the megastore effort?

The Wayfair-Way

Wayfair needs to demonstrate a path to profitability, which has eluded them almost from the start. However, developing a cohesive sustainable offline strategy to complement their complex online model is a complex undertaking; one not readily measured by near-term metrics.

Wayfair helped get me up-to-speed on the “Wayfair-Way” including data from their 2023 Investor Day shareholder meeting. My intent was to gain some insights behind the big-box effort perhaps suggesting what’s next. Here are some takeaways:

Wayfair’s offerings fall into three categories, Branded, Differentiated and Commodity.
Branded – 25 percent of annual revenue. These non-exclusive national brands are “price-matching” which limit sales margins.
Differentiated or Exclusive Brands – 70 percent of annual revenue. These include all products under the Wayfair banner generating greater profit margins.
Commodity – 5 percent of annual revenue. These brands are common to many online and offline sellers. Wayfair’s pricing makes it hard to be the low-price leader.
Wayfair’s Differentiated brands fall into three segments:
Luxury for households with $175K+ incomes
Mass for households with $60K-$175K income and
Economy for households with $60K income and below.

Brand Complexity

Now things get complicated. Besides the overarching “mothership” Wayfair brand, there are four “sister brands.” These include Perigold, AllModern (with three stores), Joss & Main (with two stores), and Birch Lane (with three stores, and a fourth pending). These brands can be found on Wayfair’s website, as well as their own branded sites.

The brand positioning lacks clarity. Perigold is clearly considered luxury. AllModern, Birch Lane, and Joss & Main appear to staddle both luxury and mass. Wayfair brand straddles all three, luxury, mass, and economy. It also boasts an additional 12 specialty private label brands (including Kelly Clarkson) that cross nine different style categories.

This “more is better” approach to brand architecture is very old-school. It’s been shown time and again to impair rather than promote decision-making and complicate operations. Additionally, these issues could well be contributing to Wayfair’s bleeding bottom line. But wait there’s more! We’ve not even addressed Wayfair’s online third-party sellers, boasting over 5,000 brands, and selling over 33 million products from 23,000 distributors.

Wayfair enters the “digital-to-phygital” realm with much muddy water under the bridge. Digital-native retailers like Bonobos, Warby Parker, Casper, Allbirds, et al., have indeed demonstrated a synergy between online and offline retail. But the offline move for these and other digital natives has been a very bumpy ride, like off-roading, Baja-style.

Moreover, comparing Wayfair to these vertically integrated digital natives is like comparing apples to artichokes. Besides Wayfair’s plethora of private brands, being a third-party marketplace gives them little control over their supply chain.

Amazon is the prime example of how difficult it can be (or was) for a third-party ecommerce marketplace to become channel agnostic. We have all witnessed the “big dog marketplace” open stores, dozens of them, only to close them all. And it wasn’t without spending boatloads of money, something Wayfair lacks.

It’s also worth noting that comparing the returns management between Amazon and Wayfair is more apples and artichokes. Sending a book, dress, or kitchen spatula back to Amazon is rather rudimentary. Returning the wrong color living room sofa, or one that accidentally fell out of the delivery truck to Wayfair is something else, entirely.

Nothing Unified About One Flagship

Throughout my four-decade career as a retail planner, designer and trend forecaster my firm was responsible for the planning and design of numerous prototype and flagship stores. Given this history and my recent deep dive into “the Wayfair Way” I had certain preconceptions of what Wayfair’s flagship store might look like. I was wrong.

While the design of the Wilmette store is exceptional, the mission given to the design group feels like “putting the internet of all things home related into a box.” They did that well. But I question the veracity of that mission.

I’m a huge proponent of unified commerce and was beating that drum back at the turn of the millennium. However, in an era of unified commerce, the actual in-store experience should augment, not replicate the online offering. And given Wayfair’s need to shine a high-lumen light on its profitable differentiated products and exclusive brands, the in-store representation of those high-margin brands felt like an afterthought at best. There was a far greater representation of major national brands and commodity offerings.

The store’s “all things to all people” approach feels like the reincarnation of Home Depot EXPO, which did not end well. Lululemon’s former CEO and founder Chip Wilson said in early 2024, “I think the definition of a brand is that you’re not everything to everybody.” Put another way, Steve Jobs used to say, “What we don’t do is as important as what we will do.”

Experiencing the Wayborhood

Central to the store’s design was the creation of “The Wayborhood,” featuring 19 departments with themed neighborhoods. However, rather than highlighting Wayfair’s differentiated, private label brands, shoppers are confronted with a plethora of national brands, reflecting the inventory of multiple big box retailers and specialized ecommerce sites.

This includes core categories and offerings seen at Ikea (kitchen, bath, lighting fixtures); Best Buy (major kitchen appliances); as well as Lowe’s and Home Depot (plumbing fixtures, lighting, tile, patio and grills).

That said, Wayfair has done a far superior job in the curation, impeccable organization, and display design over any of the big boxes. Also impressive are the digital price labels equipped with QR codes to enable customers to access detailed information. This was leading-edge stuff.

Like Ikea, Wayfair features fully staged rooms to amplify styles and lifestyle themes. But Wayfair feels less “immersive” by comparison. Rather than leaning into Ikea’s “pathway-past-everything,” Wayfair promotes a “choose one’s own adventure.” While the store has the expected wayfinding signage, the Wayfair layout provides few clues as to how to “shop” the store.

Without the comfort of Ikea’s “guided experience” customers often default to a mission-driven plan, scoping out isolated departments and missing out on the “I didn’t know I needed that” discovery. Additionally, such “targeted visits” run counter to the retailer’s objective of extending the shoppers’ stay.

Rx For What’s Next

I believe that there are some strategic and tactical decisions that can aid in becoming a bona fide unified commerce retailer:

Downsize Offline Footprint. It would be prudent to focus on creating a half-dozen, under 20,000 square-foot stores. A more manageable group of strategically located prototypes could become better “laboratories” to determine what works.
Cleaned Up Brand Architecture. Brands only matter when they have meaning. Better clarity around the brand attributes, styles and target audiences of their exclusive brands should yield greater brand value while simplifying marketing and operations. Styles come and go, customers like what they like, regardless of nomenclature.
Lean into Differentiated Offerings. With so much ubiquity and commoditization in the marketplace, more commodity-filled boxes (like Bed Bath & Beyond) are not warranted. Wayfair’s high margin, “Differentiated” exclusive brands are their best vehicle to move toward “black ink.”
Curate, Curate. Williams Sonoma’s Pottery Barn and West Elm have become successful omnichannel retailers by complementing online and catalog with stores that offer a limited stock of selected pieces in popular finishes and fabrics. This promotes in-store pick-up or drop ship, while still offering customization and endless aisle choice-making, without wasting space on low-margin SKU’s.
Build On Personal Services. Working showerheads are cool but design centers featuring the latest in AR like Wayfair’s “View in Room,” augmented by in-house professional design services (à la Ikea, Crate & Barrel) are powerful tools to build customer lifetime value (CLV).
Don’t Forget the Experience. Immersive retail only works if it’s truly dynamic and ever-changing. Wayfair might consider involving professional designers and design students to restyle and restage room vignettes on a rotating basis. Then have micro-influencers cover these and other real experiences on social media to create a sense of retail theater. Creating an inviting environment for design professionals and clients would also yield great returns.

A Story of Minnesota Brands: Winmark, Evereve, Hammer Made

Sanford Stein — Thu, 20 Jun 2024 10:00:00 +0000

Minnesota has long been the center of retail innovation. Besides being home to both Target and Best Buy, there have been countless retail innovations and brands born of the Northland. Among the many: the handled grocery bag (1912), water skies (1922), Milky Way Candy Bar (1923), masking tape (1925), Tonka Trucks (1947), and Southdale, the first indoor shopping mall (1956). Then there is the Twin Cities claim to fame, America’s preeminent retail destination Mall of America (1992).

Hammer Made’s attention to detail is mindboggling. Unexpected prints, piping, buttons, inner cuff and collar contrasts, unique trims, and their signature gussets with the now-famous Hammer logo adorn every shirt. The brilliance of such limited runs creates a FoMO factor for their loyal customer base. New looks and styles arrive virtually every week, often selling out instantly.

Beyond iconic retail brands, there is a host of smaller, consequential Minnesota-based retailers who are making a national name for themselves. What differentiates them is not their scale, but the market niche they have carved out or brilliantly occupy.

Minnesota, here we come with a trio of exceptional homegrown retailers.

Winmark is Winning in Recommerce

Unless you are steeped in the world of franchising, Winmark Corporation may be unfamiliar to you. For over 30 years, the franchising parent to well-known resellers like Plato’s Closet, Once Upon a Child, Play It Again Sports, Style Encore, and Music Go Round have been dominant resale players. In fact, it wouldn’t be hyperbole to suggest that they reinvented the once small neighborhood “thrift shop.” Winmark found a way to scale recycling and sustainability long before it was “fashionable” and before ecommerce.

Celebrated by Fortune Magazine’s 2023 annual “Change the World List” Winmark was recognized for using the power of capitalism to improve the human condition. It was among the top 59, combining social and environmental initiatives with a profit-making strategy and operations.

For over 20 years Minneapolis-based Franchise Times has published their annual Top 400 Issue of franchised operations. Considered the leading franchising news and information source, the cull to top players among the 4,000 nationally franchised operations. In the last, 2023 issue, all five of Winmark’s operating brands appeared on the list. Plato’s Closet was listed at #120, Once Upon a Child came in at #161, and Play it Again Sports batted #189. The final two operating units, Style Encore^® and Music Go Round^® were slightly over the line at #405 and #440 respectively.

Strong and Stable Player

A major differentiator and “stabilizing factor” that makes Winmark Corporation stand out is its ownership, with 71 percent of the company’s shares held by institutional investors. The list includes mutual funds, pension funds, and large financial institutions, such as The Vanguard Group, BlackRock Inc., and Dimensional Fund Advisors. Their significant stakes in the company give them influence over its ownership and governance. And given the vast amount of money and research capacity at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors.

In an era when many employees would rather “make a job” than “take a job” Winmark is uniquely positioned to help guide entrepreneurs by providing training and resources as well as financial support to start and grow their businesses. These are crucial for those lacking the necessary capital to “get in the game.” nAs of July 1, 2023, Winmark had 1,303 franchises in operation. Additionally, 70 franchises had been awarded but were not yet open.

From Hot Mama to Evereve

After a defeating dressing room experience, Megan Tamte became inspired to reimagine what fashion shopping could be. Evereve, formerly known as Hot Mama, was founded in 2004 by Megan and her husband, Michael, then an MBA student.

Initially focused on “moms-in-waiting” and moms in general, Megan dreamed of a national boutique where women felt welcomed, seen, and understood. She thought there was a vacancy in the retail landscape for a store that sold better-quality contemporary women’s fashions for high-earning women. She aimed to try and fill it. The Tamtes opened their first store in Edina, MN, in 2005.

Expanding and Rebranding

After 10 years and considerable success, the potential to expand nationally presented itself. However, by then the name and brand positioning was no longer suitable, so the whimsical Hot Mama was rebranded Evereve. The Tamtes found both validation and help with writing their next chapter, thanks to Crate & Barrel’s Co-Founder Gordon Segal who became an investor.

One of the keys to Evereve’s success, Tamte says, is that it provides a highly curated selection of upscale fashion brands which are much easier for women to access than, say Nordstrom. Their 150+ brands include Kenneth Cole, Marc Fisher, Rag and Bone, Sweaty Betty, Dolce Vita, and Guanabana. These are among the premier brands favored by women from households with average incomes of $150K-plus.

Evereve’s corps of stylists are there to help women put outfits together— in a very Nordstrom-like manner. And because they are relatively small by national specialty store norms, their loyal customers can build relationships with Evereve’s brand ambassadors. This also extends to Evereve’s personalized subscription styling service and daily fashion inspiration and conversations on their social channel @evereveofficial. With over 100 stores in 30 states (and counting) Evereve’s five-year plan is to open between 12 and 15 stores a year. They are striving to achieve about 200 units by 2030.

Is menswear in their future? The Tamtes appear to be paying attention to their customers who frequently request a menswear equivalent, crediting its success to their laser-like focus on lifestyle apparel aimed primarily at women over 30. Last September it was made public that Evereve purchased a 17 percent stake in Minnesota-based specialty menswear retailer Jaxen Grey. Grey’s terrific merchandise mix, attention to detail, and highly attentive sales staff could well be the Yang for Evereve’s Yin. Jaxen Grey, currently has three stores in Minneapolis and a fourth in St Louis, MO.

Tailormade by Hammer Made

While Winmark and Evereve represent polar opposites in terms of market space, operating structure, and customer demographic, there are important traits they share. Besides both being Minnesota born and bred, they both combine brand clarity, operational excellence, and laser-like customer focus.

A third Minnesota-born company, by far the smallest, is also worthy of mention. Hammer Made started life as a direct-to-consumer (DTC) ecommerce company. Currently celebrating its 15^th anniversary, its founder Jason Hammerberg set out to create very distinctive shirts in extremely small runs, often fewer than 100 pieces in total! Some “Limited Editions” are numbered, like a lithograph print. Their trifecta of exclusivity, distinctive fabrics and styling elevates the products to something akin to collectibles rather than attire.

Hammer Made’s attention to detail is mindboggling. Unexpected prints, piping, buttons, inner cuff and collar contrasts, unique trims, and their signature gussets with the now-famous Hammer logo adorn every shirt. The brilliance of such limited runs creates a FoMO factor for their loyal customer base. New looks and styles arrive virtually every week, often selling out instantly, like limited edition Air Jordan Nikes.

Hammer Made shirts are made in both Italy and Portugal, often by third-generation private companies. Hammerberg makes regular visits to his textile producers as well as shirtmakers to coordinate the myriad of styling choices required for each “edition.”

As you might imagine, the shirts are not inexpensive, usually running between $100 and $150. I’ll admit, ten years ago during my initial brand exposure I had sticker shock. But I, like many other brand newbies as well as seasoned brand advocates, became hooked. The feel and durability are a match for the tailored styling. In fact, my first, now 10-year-old shirt has been laundered more times than I can count and still receives compliments.

Brand Expansion, Brand Extension

The brand has recently expanded beyond their signature button-down shirt, and its four Minneapolis locations, opening in The Forum Shops at Caesars in Las Vegas. I applaud the Forum Shops move which could pay huge online sales dividends once tourists get addicted to the brand.

However, I’m a bit more measured about their brand extension move beyond their signature products (which have long included socks and ties) into general menswear. My fear is it could muddle the secret sauce and complicate the business model. While I did not receive a response from Hammer Made regarding growth-plan inquiries, I would not expect major unit expansion from this specialized brand.

Perhaps the most important upshot of this brand’s story is that there has never been a better time for a small niche specialty retail startup. With the washout and the commoditization that has taken place in middle-market retailing, opportunities abound, particularly with “make-a-job” rather than “take-a-job” next-gen entrepreneurs.

Whether that concept is digital first or not, there remains marketspace for highly differentiated and pinpoint-focused specialty retail concepts. Remember, we’ve now entered a chapter in retailing history where scale, for scale’s sake, is no longer “a thing.”

Proven Retail Winners: IKEA, Williams Sonoma, Crate + Barrel

Sanford Stein — Thu, 28 Mar 2024 10:00:00 +0000

The home furnishings industry has received shockwaves over the past three years. First Covid lockdowns fueled a home retrofit movement that injected billions of dollars into the U.S. economy. Then the polar opposite occurred as the subsidy-fed economy led to a historic rise in inflation forcing the Fed’s tightening and sending home interest rates through the roof. The super-hot industry took a polar plunge. That said, Ikea, Crate + Barrel and Williams Sonoma are the new proven retail winners; and then there is a potential loser.

Home furnishings retailing like other discretionary sectors is attempting to readjust. Yet beyond prevailing microeconomic conditions, the category is also dealing with other impactful trends, including changing demographics, population shifts, next-gen lifestyles, rapid market segmentation, delays in first-home purchases, and challenges associated with the new realities of unified commerce.

A general overview of the furnishings and décor sector reveals players that have continued to thrive, despite economic headwinds. These standouts have demonstrated an ability to read and react to changing consumer attitudes and market conditions while staying true to their core brand attributes and business fundamentals. Conversely, there are the innovators and even industry visionaries who lost touch with their customers and the market — or may have taken a path too far.

The Winners

Ikea

Founded in 1943 by Ingvar Kamrad, Ikea has been the largest furniture retailer in the world since 2008. It broke from nearly every furniture industry norm. It started by cultivating a cadre of small independent Swedish craftsmen to help orchestrate the flat-pack furniture revolution. Then rather than displaying the innovative designs in traditional massive parking-lot-like showrooms, they took a page out of the Disney playbook.

Ikea engineered (imagineered in Disney-speak) a museum-like experiential visit sequence in the form of a controlled pathway that guides the customer past fitted-out room vignettes to ensure that every customer sees everything. The carefully accessorized presentations uniquely position the Ikea brand, while focusing on solution-based versus product-based shopping. The power of immersive storytelling connecting with the shopper’s lifestyle is on full display. The result is a heightened value proposition.

Ikea has never been comfortable with the status quo. Most of Ikea’s 471 international stores are suburban big boxes located considerable distances from dense metro areas. With accessible local stores becoming a highly valued asset, Ikea began to experiment with small-format urban stores in New York, Shanghai, and Paris, but they struggled and closed.

Now, after years of trial and error, Ikea has cracked the code on downtown retail. Their newest urban format has grown to 26 units with more planned for 2024. Measuring less than one-quarter the size of their suburban boxes they are more highly tuned to unified commerce that bridges Ikea’s online and offline assets.

In addition to a more edited offering these stores utilize touchscreens, QR codes, and augmented reality (AR) to visualize how products might look in customers’ homes. While these stores lack the product volume of their big box brethren, they offer seamless purchasing and delivery from those area big boxes.

Ikea has developed one of the greatest value propositions in the industry by controlling every aspect of design, sourcing, supply chain management, sustainability, and customer service. The most recent manifestation of this is an even smaller retail/service hybrid format called “Plan and Order Point.”

Running between 11,000 and 15,000 square feet, the first of these units opened in Dallas in November 2023. At least four additional locations will open this year, with more to follow. As the name suggests, the concept boasts professional kitchen, bathroom, and bedroom planning, and design assistance, and is part of Ikea’s $2.2 billion strategy to make ready-made, flatpack furniture even more accessible.

Crate & Barrel

In December 1962, after visiting exquisitely designed and economical housewares and furnishings in European markets, Gordon and Carole Segal opened a small 1,700-square-foot store in the Old Town area of Chicago. They named it Crate & Barrel, a literal description of how they first displayed their colorful and tastefully designed articles.

By simply removing the goods from their shipping crates and placing them on top, displaying packing materials and all, Crate & Barrel exposed the American consumer to unique contemporary European designs at affordable prices. The Segals were bona fide tastemakers who understood the power of design as a brand differentiator. That heritage and design focus continues today.

Like Ikea, Crate & Barrel’s continued success has been a result of constant testing and evolution to meet the needs of an ever-evolving marketplace. As a result of the pandemic and our overnight shift to online purchasing, the company started to reimagine its store design.

A new, more unified approach to blending online with offline selling was tested in its Twelve Oaks, Michigan, and Walnut Creek, California stores in late 2022 and early 2023. Now, the newest flagship design, located in New York City Flatiron district represents a full manifestation of the reimagined brand.

Crate & Barrel is a Robin Report Retail Radical and Robin Lewis called out, “The store is breathtaking as much an art installation of home goods as a market for the brand’s distinctive products.” The fastidious, yet authentic focus on visual merchandising that has been a hallmark of the brand has been elevated to aid in product storytelling and creating a more immersive customer experience.

As with Ikea, both retailers learned that retailing was no longer about online versus offline, but rather about the opportunities presented by unifying the two channels. New tools for assisted selling were introduced with multiple spaces devoted to design services to support the 30 designers on staff. Again, this is a tip of the hat to solution-based selling versus product-based selling.

Williams Sonoma, Inc.

Like Crate & Barrel, the Williams Sonoma story also started as a passion project, and its origin story continues to be honored to this day.

Founder Chuck Williams first moved to Sonoma in 1947, where he cultivated a love of cooking. During a European excursion in 1953, Williams was introduced to classic French cooking equipment, unlike anything he had seen in America. One year later, he purchased a hardware store in downtown Sonoma, specializing in French cookware.

Today, besides the venerable Williams Sonoma, the brand family includes Williams Sonoma Home, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Mark and Graham, and Rejuvenation. They masterfully leverage market demands that serve a wide range of categories, aesthetics, and life stages.

Their value proposition has helped stimulate its growth prospects despite the ongoing macroeconomic challenges. The company’s strategic decision to resist discounting during the pandemic was a notable differentiator contributing to its resilience while maintaining great margins.

The company has deftly utilized AI to personalize marketing efforts, making its communications with customers more relevant and targeted. They are also one of the most profitable e-commerce companies and have made parallel investments online and offline early on, recognizing channel synergies.

Williams Sonoma’s stock price currently hovers around $242, nearly 20 percent higher than its pre-pandemic peak of $204 per share. Combining a diversified product portfolio, the evolution and success of its profitable ecommerce platform, and the growth of its business-to-business (B2B) division have contributed to a category trifecta. Leveraging its expanding global scale, despite the lingering softness in consumer spending will continue to feed growth.

A Potential Loser

Wayfair

Wayfair is one of the largest online-only home goods retailers in the world, with more than 15,000 employees and over 20 million active customers. It was founded in 2002 by two entrepreneurs Niraj Shah and Steve Conine under the name of CSN stores. The founders saw an opportunity to take the Amazon template and “home in” on furniture, furnishings, and décor. In the process, Wayfair has raised a total of $2.3 billion in funding across five rounds. Now, over two decades later, investors are losing patience on their promise of profits.

Wayfair boasts over 5,000 brands, selling over 33 million products from 23,000 distributors. It still has a good balance sheet and the opportunity to make their business model work, but their “more-is-better” ethos has been fraught with operational challenges. For the past 22 years Wayfair was profitable only in 2020, and not since. In their latest quarterly earnings call of February 22, Wayfair announced their 2023 fourth-quarter results reporting a lackluster 0.4 percent year-on-year revenue growth which was in line with analysts’ expectations.

However, after proclaiming 2023 was to be the “Year of the Reset,” Wayfair reported net revenue fell 1.8 percent year over year to $12 billion, with U.S. revenue up 0.2 percent and international revenue falling 13.3 percent. From an investor’s viewpoint, all the red ink might be more digestible if healthy growth accompanies it. Not the case here. Wayfair’s revenue has been declining over the last three years, dropping on average by 3.4 percent annually. Now, more than ever their business model is being questioned.

As the bulk of Wayfair’s sales are third-party transactions, few items are exclusive, and most can be found elsewhere on the web, including on Amazon. Even its top-owned brands AllModern, Birch LN, Joss & Main, and Perigold can be purchased elsewhere. And, as with most third-party marketplaces, margins are very tight, further exacerbated by Wayfair’s lenient return program. Imagine comparing the costs of returning a sofa versus a pair of socks.

Perhaps Wayfair’s biggest asset is also its biggest liability. Sure, they’re the biggest player, but beyond their size, they have little brand differentiation. This lies in stark contrast to our winners Ikea, Crate and Barrel, and the Williams Sonoma furniture lines (Pottery Barn, West Elm, Rejuvenation) that offer uniquely designed products, highly tuned to their customers’ individual tastes and lifestyles.

Additionally, the winning brands maintain tight control over design, manufacturing, distribution, marketing, and the all-important path to purchase. The main differentiator is the ability to touch and feel real products, with or without informed brand ambassadors. This affords each a pathway to greater brand loyalty and lifelong customer value.

Loyalty, trust, and customer satisfaction are at low points. A 2022 Statista report pegs Wayfair’s customer loyalty at a meager 18 percent. As far as trust is concerned, TrustPilot gives Wayfair a rating of 1.4, which is lower than Amazon’s rating of 1.8. Regrettably, both Wayfair and Amazon have substantial complaints about how customer service is provided. However, Wayfair also has many complaints about product description inaccuracies, delivery, and assembly of products.

RapidRatings Executive Chairman James Gellert says, “It’s hard for a Wayfair to have a loyal customer base when a customer may buy from them and then be perfectly happy to buy from Overstock or from Target, so they must keep spending to be in the face of their customers.” This, in my opinion, is not sustainable.

In spite of all of this bad news, Wayfair continues to rearrange its deck chairs. Beginning in 2018, Wayfair operated a variety of pop-up shops as well as a smaller format retail store at the Natick Mall in 2019 which it closed the following year. Wayfair continues to operate two owned brand AllModern stores and two Joss & Main brick-and-mortar stores.

Now, after years of teasing the addition of a Wayfair flagship retail store, one is expected to open in the Chicago suburb of Wilmette, IL this spring. And while this costly undertaking is sure to create much fanfare, it will likely not change their prognosis for survival.

As Wayfair continues to lose money in an environment that continues to be more challenging to master, I believe it will continue to be burdened by the inherent challenges of “just being big.”

Carhartt and Red Wing: Everything Old Is New Again

Sanford Stein — Thu, 16 Nov 2023 11:00:26 +0000

For many next-gen consumers, the term “trusted brand” seems like an oxymoron. The combined 140 million Gen Y (aka millennial) and Gen Z cohorts are responsible for a combined $165 billion in annual U.S. sales. Yet they influence a staggering $350 billion in annual purchasing. Plus, they share a mutual distrust of self-aggrandizing brands, unless they meet their own next-gen litmus tests.

Two of my Robin Report colleagues recently highlighted this very point. Jasmine Glasheen states “Gen Z shops with retailers for their value, and shops with brands for their values. While Arick Wierson emphasized the “authenticity imperative” related to brand positioning and marketing. He noted that Zoomers “crave authenticity, and they can spot a polished, scripted message from 100 miles away.”

To an increasing number of next-gen consumers, the idea of buying uber-expensive fashions that have undergone environmentally harmful “artificial aging” is being rejected. Instead, some would rather buy an authentic Carhartt piece and naturally age the item by wearing and enjoying it as it gets better with time.

Keeping Things Real

I’ve recently been reminded of two different century-old brands that have developed significant Gen Y and Gen Z followings without even trying. These two legacy brands have been in business for a combined 260 years. Both have endured and prospered by staying true to their founders’ visions and missions.

Both Carhartt and Red Wing Shoe Company share a provenance based on craftsmanship, durability, and utility. Both have remained standards in their industries and neither has bowed to passing fads or fashion trends. Yet ironically, the trends have come to them.

Old School Cool

In early October Lowe’s announced a partnership with Carhartt to feature the iconic brand’s duck jackets and vests, as well as hoodies, T-shirts, workwear pants and caps. The collection is currently available in about 250 Northeast, Midwest, and Pacific Northwest Lowe’s stores, and will expand to include about the same number of stores in Texas, the Southeast, and California by early 2024.

Founded in 1889 by Hamilton Carhartt, the 135-year-old company has been known for producing gear designed to “serve and protect” hardworking pros. More recently that same workforce brand has found its way into streetwear, even becoming a pop-culture brand, most likely because it never intended to.

More than Nostalgia

The current wave of 90s nostalgia with oversized fit has undoubtedly contributed to the brand\’s popularity. Carhartt’s hip-hop connection has been traced back to American independent record label Tommy Boy Records when it bought 800 Carhartt jackets, added its logo, and gave the jackets to their acts. This gave the vintage brand “street cred” and by 1992, the brand’s new status was on the radar of mainstream media.

But beyond the nostalgia, there are practical reasons why a pre-industrial age brand designed for working men and women has cultivated newfound fans. Carhartt is “hard-wearing” and lasts a long time. That speaks volumes to Gen Y and Gen Z attitudes with sustainability and authenticity in mind. “Buy it once and wear it forever.”

Natural Aging

To an increasing number of next-gen consumers, the idea of buying uber-expensive fashions that have undergone environmentally harmful “artificial aging” is being rejected. Instead, some would rather buy an authentic Carhartt piece and naturally age the item by wearing and enjoying it as it gets better with time.

Carhartt’s authentic American brand is the antithesis of the many fast fashion brands that can morph from TikTok to turn-off in a nanosecond. And authentic brands like Carhartt make little fashion pretense beyond their utility and durability. That dynamic duo resonates with younger customers.

As Lowe’s executive vice president of merchandising, Bill Boltz puts it, \”Not only is Carhartt a workwear staple, but it is also a popular brand for daily living.” I’m sure he appreciates the streetwear halo effect provided by Carhartt’s Mall of America store where few if any customers are wearing tool-belts while shopping for the brand.

Boots Are Made for Working and Runway Walking

Red Wing boots have been a staple in factories, farms, and foundries for over a century. And for the past three decades, their popularity has spread to urban streets and fashion runways.

Only slightly younger than Carhartt, Red Wing Shoe Company was founded in Red Wing Minnesota in 1905. The company has a storied legacy of traditional construction and timeless design. Furthermore, it has credibility as an inclusive brand and employer. Its popular “Gloria” boot was first introduced in 1926. This was prior to Levi’s 1934 introduction of Lady Levi’s. In 2022 Allison Gettings became Red Wing Shoe Company’s first women CEO.

My Red Wing Initiation

I first became aware of Red Wing Shoes as it expanded its international street fashion cred back in 1999. It coincided with my retail design firm’s development of an experiential Red Wing store at Mall of America.

By then Redwing had become a grunge-era staple in the U.S. Surprisingly, from the moment the MOA store opened, Asian tourists were visiting the store in great numbers and purchasing multiple pairs of boots to ship back home.

I later learned that Japan’s love affair with Red Wing boots dates back to the 1970s, and truly exploded in 1976 when a Red Wing boot appeared on the cover of “Made in U.S.A.-2 – Scrapbook of America,” a hugely influential culture magazine. Pictures of West Coast Americans dressed in torn jeans, t-shirts, and very worn-out work boots caught on in a big way. That moment in time was so impactful that Japanese youth started to enthusiastically adopt the fashion, even though America’s pop culture mavens hadn’t yet embraced it.

Red Wing eventually assigned a distributor to Japan in 1982 who labored to sell Red Wing as industrial work boots, only to realize that there was more opportunity, and profit selling them as a lifestyle brand.

Branding 101

I was recently reminded of Red Wing, Minnesota’s rich contribution to America’s industrial heritage while on our annual autumn “leaf turning” drive that brought us back to the little town south of Minneapolis.

Besides Red Wing Shoe, the town’s other claim to fame is Red Wing Stoneware Company, manufacturers of their namesake pottery, founded in 1861 by German immigrant John Paul. I have a particular affinity to that brand as my grandfather, an early 20^th-century general store proprietor, promoted his rural Wisconsin business by giving away Red Wing bean pots to his loyal customers during the holiday season.

As was the custom, the pots were inscribed with the proprietor’s name as well as a cheeky tagline. I have amassed a nice collection of that cookware dating back to 1921, bearing the inscription “When you bake, try me, when you buy, try Peter Bootzin, The Corner Store Medford, WI.”

A Museum Worth Visiting

Regrettably, the Red Wing Stoneware Company closed in 2019. But Red Wing and its 17,000 inhabitants remain extremely proud of their namesake footwear manufacturer. In fact, it’s often difficult to separate the two as the logo for the city and the shoe company are quite similar.

Then there are the countless Red Wing families who have relied on the company for their livelihoods for over a century. Throughout the 20^th century there were often as many as three generations from the same family crafting and cobbling.

This honorable heritage is shared with visitors to the Red Wing Shoe Museum providing the ultimate immersive brand experience, blending both heritage and retail in a single destination.

Really Big Boot

Museum visitors are first astounded by a completely authentic, highly detailed, Style #877, Red Wing boot, size 638½ D. It stands over 16 feet tall (two stories) and is 20 feet long. The ginormous boot was originally constructed to celebrate the company’s centennial anniversary in 2005. It weighs over a ton and was authentically and lovingly cobbled by Red Wing workers utilizing the hides of about 800 cows.

Throughout the museum and store are stories and artifacts that close the loop between the iconic footwear brand and the artisans and craftspeople who have repeated the same 230 steps utilized to handcraft a boot. Often, they employ the same machines and processes that have been used for generations. The museum also pays homage to the advertisements created for the company by Norman Rockwell.

A Lifetime of Love

Besides Red Wing boots’ timeless design, the brand’s focus on sustainability plays as well in Japan as it does in America. Red Wing boots can be given new life, essentially repaired to their original quality by the factory. The company offers a menu of choices to renew, beautify, or literally rebuild a boot.

And in an era when circular fashion, recycling, heritage, and authenticity are becoming watchwords to next-gen consumers, it makes for a very compelling brand story.

Formula for Futureproofing a Brand

Naturally, there is not a plethora of brands that have the heritage of Carhartt and Red Wing Shoe Co. That said, these brands’ traditions of authenticity, clarity of purpose, sustainability, transparency, and quality could be replicated by brands the world over. Add storytelling around both the brand and its brand advocates, and you have a formula for futureproofing and a solution to planned obsolescence.