Children's apparel retailers. market share shift

GW Retail /Merchandising
/Trends / Operations / December
2014
1
Children’s Apparel
Retailers
Market Share Shift.
What’s the impact on brick and mortar retailers?
 Zulily, now a public company, can they handle the growth and show a solid
profit?
Nordstrom’s Hautelook and Nordstrom’s Rack Online. First brick and mortar
with full-line flash sales sites.
Amazon’s Myhabit, growing fast.
Gymboree improves for Q3. Can they come out of a long, bad performance?
Children’s Place solid bottom line, but small comp on the top line.
Gap Kids, “ho-hum”.
Old Navy, “rock-on”.
Carters, keep moving solidly forward.
Department stores.
Recap.
Questions / Discussion.

Nordstrom’s First Brick and Mortar
Retailer with Flash Sites.
 Hautelook and Nordstrom Rack
 First come / first serve model.
 Event driven. Official start and ending times.
 Highly recognizable brands.
 Wide assortments. Home, accessories, shoes, jewelry.
Apparel for children, women and men.
 Most items returnable. Mail it back or return it to a
Nordstrom Rack store.
 Opportunity: Speed up delivery.
 Both Norstrom Rack and Hautelook offer similar products and
events.
 Both sites have very strong children’s apparel presence.
2014
2

/Trends / Operatins / Feb 2014
3
Zulily: Here’s the Deal:
 Product focus: Children and women’s apparel.
 Strategic model:
 First come, first serve, flash site for boutique designer brands
product offered at discounted prices.
 New offers everyday. Over 15,000 brands offered to date.
 Very large and fast growing active customer file. Over a million
new active customer added every quarter this year. Spend per
customer is also growing.
 Dozens of “big data projects” are going on every day to keep
active customers connected to their offers.
 Looking for more operating efficiency to support growth. Adding
new fulfillment centers and additional distribution points.
 Inventory is owned after the customer has placed an order. This
model keeps cost down and efficiency up.
 Zulily is spending significant capital supporting continue
aggressive growth.

Zulily: Customer Perspective:
What’s working:
 Thousands of designer
goods.
 Great prices. Big
discounts.
 New offers daily.
 They're focused on what I
want. Customer info is
used to help customers to
the next sales.
 Many more choices.
Broader assortments.
What’s not working:
 Slow delivery of orders. Two
to three weeks vs Amazon’s
two to three days.
 Most product not returnable.
“You buy it / you keep it”, is
not competitive with sites
like Myhabit and Nordstroms
Hautelook. Sizing is different
by brand, so its hard to know
what will fit.
 Many brands are unfamiliar
boutique brands vs their
competitions national brands.
Better balance is needed.
4

2014
5
 Myhabit is a flash sales site. It’s event driven,
with start and ending times. Thousands of
brands offered. Wide assort of children’s,
women and men’s apparel.
 National brands and designer fashion focused.
 Fast delivery and products are returnable.
 Amazon like customer profiling. Very good
customer history tracking.
 Free shipping.
Amazon’s Myhabit.com:

2014
6
Gymboree improves in Q3:
 Comps for Gymboree brand
“flattish”. Big improvement over
previous quarters.
 Crazy8 still tracking with down
comps. That should not be the
case considering the newness of
the brand.
 Janie and Jack, “up mid single
digits”. The positive trend for this
brand continues. Fashion driven.
 Online sales just okay.
Management calls e-commerce
business “mature”. I disagree.
 Franchise businesses,
international stores and play &
music, continue to have solid
traction.
Some major issues to solve:
 Expense still too high.
 Management has a $20m expense
reduction initiative, But we have not
detailed how it will be accomplished.
 Crazy8 is still floundering. No clear
product point of view.
 Gymboree stores appear to have too
many mark downs, too many
collections. Inventories look out of
balance.
 Merchandising to older children
sizes, but the brands fashion
appears very young. Misplaced
effort?
 Missing the omni-channel trends.
Gymboree is not competitive with
digital trends for this customer.
 Marketing is lacking creativity. Most
marketing efforts are mark down
driven.

2014
7
The Children’s Place:
 Operational controls
appear to be in place.
 SG&A expense decline.
 Exceeding last years
net income, in spite of
soft comp sales.
 My worry list:
 All sales are mark down
driven, not fashion newness
driven.
 No top line growth.
 Store visits reveal weakness
in store standards. Over
crowded merchandising and
weak presentations. This
was not always the case.
 No omni-channel efforts
noted. Digital competence is
a major opportunity. Will not
be able to compete with
online brands.

Carters Marches on:
 Solid performance all year.
 Improvements with Osh Kosh.
 Great online sales growth.
 All segments (wholesale, retail, international,
online) have sales growth.
 Retail is now equal to wholesale volume. Store
count keeps growing.
 Sales model is not mall traffic dependent.
8

2014
9
Gap Kids / Old Navy Kids
 Gap Kids:
 Store visits reveal no
newness.
 Fashion is mostly adult
looks in children’s sizes.
More “fun looks” are
needed. Ticket price is high.
 Quality is solid.
 High level of digital
competence.
 Old Navy Kids:
 Driving sales with special
buys, special events.
 Great weekend deals that
draw traffic to stores.
 Large social media
following.
 High level of digital
competence.

2014
10
Department Stores and Big Box.
Department stores are not giving up children’s apparel
market share easily:
 Most of the dept stores are competitive on fashion,
special events and brand choices.
 As a group, they seem to understand the importance
omni-channel and social media even better than
specialty retailers.

2014
11
Recap:
 Flash sales site are taking market share. Fast.
 Mall based retailers have a big up hill battle for
top and bottom line growth.
 Customer profiles, their product interest and
social media are a key part of growing and
keeping sales.
 National brands and fashion leadership are as
important as ever.
 Tech and marketing talent is key.
 Companies need a “C” level person with these
skills at the decision making level.
 Cutting expenses is important to do , but you
must grow market share from several channels.
This will be the only way to keep your retail
customer.

2014
12
Children’s Apparel Retailers
Market Share Shift.
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Children's apparel retailers. market share shift

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