Hot Segments 2016

This article was published in the August 2016 issue of STORES Magazine.

 

 

The Hot 100 also takes a deep dive into several retail segments. Here retailers are ranked by year-over-year gains in market share basis points.

2016 Hot 100 Retailer Highlights from NRF on SlideShare

Jump to: E-commerce · Food/Drug/Mass · Hardgoods · Softgoods

E-commerce

Forrester Research says e-commerce in general is slated to grow to $523 billion by 2020; Amazon.com is getting an ever-bigger piece of the pie, increasing its market share by 1.69 percentage points.

Evine Live says e-commerce accounted for 48.8 percent of sales in this year’s first quarter. “Digital continues to be a high-growth channel for us and we believe that this digital penetration will ramp even faster as we track more customers that are comfortable using smartphones and other touchscreen devices as a shopping medium,” interim chief executive Bob Rosenblatt told securities analysts in a conference call discussing first quarter performance.

No. 49 Gilt Groupe, acquired by Hudson’s Bay in January, is leading the way in improving personalization for websites like Saks Fifth Avenue’s.

No. 49 Gilt Groupe, acquired by Hudson’s Bay in January, is leading the way in improving personalization for websites like Saks Fifth Avenue’s.

Gilt Groupe’s flash sale business model was on the wane after the Great Recession when manufacturers were happy to unload excess inventory at deep discounts. After a $50 million fundraising effort failed to turn things around, Hudson’s Bay stepped in and paid only about a quarter of what Gilt Groupe had once been worth.

“Gilt, when it came to us, was not growing at the same rate we were, and it’s going to take us a while to get them where we want them to be,” Jerry Storch, Hudson’s Bay chief executive, said in discussing this year’s first quarter results. “We’ve begun to utilize them quite heavily for other banners with their skill in personalization and mobile technology, so they’re leading the way in improving the personalization, for example, on the Saks Fifth Avenue website.”

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Food / Drug / Mass

Market share gainers in the food-drug-mass segment are topped by Dollar Tree, no surprise in light of its 2014 takeover of Family Dollar. Dollar General responded to the challenge by opening more of its own locations.

Food retailers are the largest single group on this year’s chart, led by Haggen after its transition from a small Pacific Northwest operator to a super-regional operator five times as big (and back to being a local chain that had to sell itself to Albertsons this year — too late to impact its standing in the Hot 100).

CVS increased its MinuteClinic footprint by 8 percent.

CVS increased its MinuteClinic footprint by 8 percent.

Other grocers include Publix, which eschews acquisitions in favor of opening its own stores as it rolls up the Atlantic coast and westward to the Mississippi River. German-owned Aldi and sibling Trader Joe’s keep opening stores at what amounts to breakneck speed in the supermarket segment, and Smart & Final has been on a growth spurt, including obtaining 33 California locations from Haggen.

CVS led drug store retailers receiving a boost in market share; the chain is now operating pharmacies in 1,672 Target discount stores, increasing its pharmacy footprint 20 percent and its MinuteClinic footprint by 8 percent.

Casey’s General Stores reported record results after opening a second distribution center, launching a mobile app and posting same-store sales gains of 7.1 percent for groceries and merchandise and 8.4 percent for prepared food and fountain drinks.

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Hardgoods

The fastest-growing hard goods retailers deal in electronic devices and merchandise for consumers’ homes and cars. The lone exception is outdoor retailer Bass Pro Shops, which added 13 stores last year and saw its Memphis store pull in 3 million visitors in its first year of operation.

The location is not surprising, given a new type of customer the retailer is attracting. “There’s a shift within the pool of people who hunt — it’s becoming a lifestyle thing,” says Rob Southwick of research firm Southwick Associates, which specializes in outdoor markets. “There’s a lot more specialization, there’s a bigger overall selection in stores and price points are going up because people are willing to pay more.”

Stan Lippelman, Bass Pro Shops’ vice president of marketing, echoes this observation. “If someone is going to be hunting in the mountains of Alaska for one or two weeks, there’s no amount of money they’re uncomfortable spending so that they’re safe and warm when they go there. Years ago, you bought a bulky parka to keep yourself warm. Now there’s more technology with new insulation and better fabrics.”

Outdoor retailer Bass Pro Shops jumps to No. 43 as it attracts a new type of customer.

Outdoor retailer Bass Pro Shops jumps to No. 43 as it attracts a new type of customer.

Home-oriented retailers are a diverse lot within their own segment, including the sprawling presentations of Nebraska Furniture Mart, part of Warren Buffet’s Berkshire Hathaway portfolio, trendy décor vendor Restoration Hardware and America’s favorite neighborhood hardware store, Ace Hardware.

Ace has finished atop the Home Improvement Retailer Satisfaction study conducted by J. D. Power and Associates each of the past 10 years. What customers like most are Ace store facilities in general and the staff and service in particular, due to the quickness with which they are waited on when entering a store. Most customers said they expected to be served within two minutes.

Ace is a cooperative owned by independent hardware and home center dealers, and the key to Ace’s success in customer service is people, says Chris Petersen, president of Integrated Marketing Solutions.

“Ace simply doesn’t view staff as a labor cost. They invest in them as a strategic differentiator,” he says. “While Ace may not have all of the variety of building supplies like the big box retailers, they do have the people trained to help you find a solution.”

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Softgoods

Softgoods aren’t just for apparel retailers anymore, though they still dominate the category as measured by gain in market share. Joining clothing stores are department stores, sporting goods dealers, footwear and accessories stores and an extreme value variety chain.

The last, Five Below, targets teens, pre-teens and their parents with merchandise grouped in eight “worlds” — Style, Room, Sports, Tech, Crafts, Party, Candy and Now. After opening 70 stores last year, Five Below expects to add 85 new locations in 2016.

In spite of the success of TJX and Ross Stores, fast fashion has been the primary story in apparel retailing. Sweden-based H&M pioneered the concept in this country and has stayed at the head of the pack.

H&M pioneered the concept of fast fashion and continues to stay ahead of the pack at No. 10.

H&M pioneered the concept of fast fashion and continues to stay ahead of the pack at No. 10.

Part of H&M’s success can be attributed to digital marketing. “Digital media is no longer the future but the present. Bloggers are everywhere,” says Marybeth Schmitt, H&M’s director of communications. “They have strong global influence that represents different styles and personalities, which is key in being able to show how clothing can work for everyone.”

H&M showed a 0.4 percent share of market gain last year, but is facing headwinds so far in 2016. For one thing, its competitors are again much more promotional and the company said it had to take higher markdowns on spring merchandise.

The problem might not be that isolated, however, and could reflect what is taking place in the market. In noting the slowing growth at H&M, Craig Johnson, president of Customer Growth Partners, says “the fast fashion market has peaked.” Johnson points to Uniqlo’s woes and Forever 21, “which has negative same-store sales in the high teens.”

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