Tuesday, May 10, 2016

Mall Surprise

It's been a few years since I went to a mall, and I visited a tier 2 mall Saturday.  It had a Nordstrom, Macy's JCPenney and a Sears.  I was looking for "wife-beater" undershirts (what are they called otherwise?) and I was happy with the Macy's house brand, Alfani, from a few years ago.  They were extra long compared to others around. Nonetheless I checked out the other stores for academic purposes.  First this:
Sears is suffering from the steepest decline in operating performance since 2006 among its rivals, according to a new report from research firm Green Street Advisors. Based on the firm's operating performance index, which measures same-store sales growth by gross margin percentage, Sears has seen a decline of more than 50 percent, compared with about 10 percent for Nordstrom and Macy's.
Well, that says a 50% reduction in "sales growth by gross margin percentage." Why do they use such narrow complicated metrics?  Sears top line sales have been dropping for years.  Everything else is massively complicated financial engineering.  Sears is a dinosaur with a brain too small to adjust to the environmental changes facing it. Visiting the store it was was clear they are in distress.  The inventory was sparse, it looked like Sears figured how to source from North Korea, and I don't think I saw an employee anywhere.  I moved on to JCPenney.

Here again the pickin's were slim, and a big sign told me "the line forms here."  Well, I came looking for undershirts, not lines, so that was off-putting, and I think they'd be lucky to have a line.   On a Saturday afternoon they did not. Not much on offer, looks like they skipped bringing in new inventory.

So finally to Macy's where I found the undershirts, same price as a few years ago.  Macy's looked ok, although the style was uninspired, and near impossible to tell adult from children's clothes.  Also, there were discount bins with goods clearly left over from the Christmas season (Ugly Christmas Ties, as a gag gift item.)  In May? The clerk offered me a 20% discount if I acquired a Macy's credit card on the spot.  No thanks, that costs too much.

Since I am disinclined to spend time at malls, I did not check out Nordstrom, I left having acquired my shirts.

Come to find the Macy's shirts are at least 15% shorter now than the last time I bought.  Fie!  Like everywhere else, quality nor quantity is being cut to maintain price.  We are becoming so third world.  That Macy's brand just lost me as a customer.  But who cares, Macy's exists to trap people with usury, which keeps their stores open, for now.

(Update: So after a week of wearing these shirts and cleaning and wearing, if find the whole shirt is a size smaller, not just a shorter tail.  What is being marked large today is what was medium a few years ago.  The problem is the same, just a difference in tactic.)

A smaller but consistently profitable fruit packer once told me the key to success was pack to grade and consistent quality.  You'd think that would be the standard, but it is not.  Many packers try to cheat on this, and offer lower price.  A brand get associated with quality.

If I am right, and Alfani was the best value in 100% cotton undershirts, then if someone was into that product area, they could easily put their brand on the same thing from the same factory in (is it Pakistan?) and then maintain the standards no matter what. Maybe the weave could be a bit denser. Of course never sell to Sears, Macy's, etc (they would not buy from you anyway).  Sell to specialty small retailers, which will be reviving now that these dinosaurs are dying.

At a bus stop I was conversing with an American of African ancestry, which means the odds were better than even he was an ex-con.  He complimented my jacket, and noted how his ghetto inspired outfit was perfect, not an element out of place and everything first rate quality.  He said he was a musician on his way to a gig, which he usually did for free, hoping for break.  I suggested with his care for sartorial perfection he might open a menswear store.  We discussed that a bit.

Gumps got started selling mirrors to saloons in San Francisco during the gold rush.  Big Business.  Mirrors were necessary to get more light into spaces before electricity, and frontier bar fights often yielded broken mirrors.  Seattle's post war premier women's fashion house, John Doyle Bishop, got his start dressing hookers in Alaska, and went legit in Seattle when the war ended.  Every saint has a past, every sinner has a future.

A key to this is rents dropping.  Sears smartly spun off their real estate holdings and sold them at top dollar.  Well, a smart guy in the center did so, selling off the REITs to guess who, school pensions.

The damage is done during the boom years.  The bust is just where it is decided who pays for the damage.  If you have property, paycheck or pension, you are a sitting duck.  Right now, pensioners are being hammered, suffering daily, and not a peep.  Maybe people are making noise, which explains Bernie and the Donald.

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