March 27, 2017 Consensus

The Weekly Consensus – March 27, 2017 (Volume 9, Number 13)

The Big Story
You Don’t Have to Fake It to Make It:
Why Brands Need to Avoid Fake News
Rob Bailey, Managing Director Consumer Marketing, KCSA

Fake news is a type of hoax or deliberate spread of misinformation, be it via the traditional news media or via social media, with the intent to mislead in order to gain financially or politically. It often employs eye-catching headlines or entirely fabricated news-stories in order to increase readership and, in the case of internet-based stories, online sharing. (Source: Wikipedia)

A recent study by Stanford University professor Matthew Gentzkow and his NYU counterpart Hunt Allcott revealed that only 8% of 1,200 US respondents believed false news stories were accurate. So, why are consumers, and the marketers that want to grab their attention, so smitten with fake news websites? The answer is simple: consumers find them interesting and entertaining, and marketers are enamored with the sheer volume of consumers these fake news sites enable them to reach.

Start-ups and young companies often look for the most cost effective ways to secure eyeballs. This includes banner ads and pop ups on highly trafficked fake news sites. This might seem like a cost effective and strategic way to generate awareness, but it entails serious risks. Appearing alongside fake news may make customers suspect a brand isn’t telling the truth in its advertising. Or ever worse, customers who strongly object to fake news may shun a brand or even start boycotts.

In December 2016, Kellogg’s hit the headlines when the brand’s customers objected to ad placement for its cereals on, a right-wing site with a history of promulgating fake news. Allstate and Warby Parker were almost immediately hit with the same problem due to ads on the same site.

Kellogg’s removed all ads from the site, claiming the company was unaware of the real estate their ads were inhabiting. But, the damage had already been done. An iconic brand like Kellogg’s can withstand that type of misstep. A less established brand might not be as fortunate.

This means companies must be able to differentiate between real and fake news to avoid awkward or embarrassing ad placement. Fortunately, media outlets ranging from the BBC to Forbes have provided guidelines to help consumers differentiate real news from fake news, and these guidelines are also useful for brand marketers making ad placement decisions.

“Taking the customer journey and reputation management into account, it’s important for brands to identify, distinguish, and manage real and fake news,” says Tanner Rankin, CEO of Source Approach. “Influencing factors such as this can directly impact your customers’ journey to discover, locate, measure, and purchase your products or services. Monitoring and managing your brand’s reputation is incredibly important.”

Companies should not put their brands at risk to rev up SEO. A solid, strategic marketing plan, established and implemented by a reputable professional is the best investment a company can make it in its brand. Otherwise, they might have to call that same resource to clean up a mess that could have been avoided in the first place.

 Apparel & Footwear

MM.LaFleur: The startup that wants to dress you for the office

As the “athleisure” trend keeps up its long tyranny, many retailers are ordering up loads of jogger pants and stylized sweatshirts instead of tailored trousers and silk blouses.  Meanwhile, mid-price stalwarts such as Ann Taylor and Banana Republic seem to be operating with a broken fashion compass. Department stores are chasing hard after shinier objects, trying to win over millennials with trendy casual clothes.  All of this has left a serious vacuum in the marketplace. And that white space is where women’s apparel start-up MM.LaFleur hopes to make its name.  In a sense, MM.LaFleur is wagering that the retail industry has been wrong about what a huge swath of 30- to 50-year-old women want.  But a core part of MM.LaFleur’s strategy is not just the attributes of the merchandise, but also a philosophy about customers’ attitudes toward shopping.

Bebe Plans to Shut Its Stores and Focus on Web Sales

Bebe Stores Inc., a women’s apparel chain with locations across the U.S., is planning to shut its stores and seek a turnaround as an online brand, according to people familiar with the situation.

The company is trying to close the locations without filing for bankruptcy, said the people, who asked not to be identified because the efforts aren’t public. However, Chapter 11 may be required if enough landlords aren’t willing to negotiate, they said. The company, known for selling trendy going-out apparel to young women, has been operating about 170 boutique and outlet stores.

Bebe would become the latest retailer to shed brick-and-mortar stores and hitch its fortunes to e-commerce. Kenneth Cole Productions said in November that it would close almost all of its locations, concentrating instead on its online, international and wholesale businesses.

1,100 Jones Bootmaker jobs at risk as private equity deal collapses

Jones Bootmaker is expected to call in administrators on Friday in a move that will put more than 1,100 jobs at risk.  The shoe retailer, which employs 1,145 people, has nearly 100 stores and a handful of concessions in department stores. It is understood to be close to going under after a deal with a private equity firm collapsed.   Jones’s difficulties came a day after rival shoe retailer Brantano fell into administration putting more than 1,000 jobs at risk. Bothare owned by Alteri, a private equity investor.  Pavers, a York-based footwear specialist, is believed to be interested in buying some of the Jones stores to add to its 120-store chain but a deal is not expected to be finalised in time to resolve a cash crunch caused by a forthcoming rental bill.

Athletic & Sporting Goods

Adidas ditching hockey apparel brand in favor of own name

Adidas is killing the CCM apparel brand.  The sportswear giant announced it was selling its CCM hockey brand as it continues to move away from the sports hard-goods space.  What Adidas didn’t say was that it was keeping the CCM apparel license, not transferring it to the new CCM owner.  Starting next season, Adidas will get rid of the CCM name on NHL apparel, replacing it with Adidas, a source said.

Nike’s earnings were better than expected, but the beat was ‘low quality’

Nike Inc. reported better-than-expected earnings for the third quarter, but analysts call the beat “low quality” because it was based on factors like lower expenses rather than higher revenue.  Nike reported earnings per share of 68 cents, up from 55 cents for the year-ago period and beating the 53-cent FactSet consensus. However, sales were $8.43 billion, up from $8.03 billion last year, but below the $8.47 billion FactSet consensus.

Cosmetics & Pharmacy

Jessica Alba’s Honest Co. Beauty Line Launches First Mass Market Release At Target Stores

Target will begin selling Jessica Alba’s Honest Beauty in their stores starting March 26th.  The ever expanding Honest Company has had its products sold at Target for years – but will begin a mass-market launch of their beauty products next week.  Honest Beauty was previously only available at Ulta Stores – the brand has more than 30 products across skin care, hair care and makeup.  “Target has been an incredible partner for The Honest Company for several years now so it was a natural evolution to expand our partnership with the introduction of Honest Beauty,” Alba wrote.

Avon Products Freshening Up Approach to Win Back Customers

Avon Products (AVP), one of the biggest direct sellers in the United States, have been losing market share over the past few years and are looking to change their approach.  Sales by U.S. direct-selling companies climbed by 5% in 2015 to $36 billion – and are up more than 25% since 2010.  Avon has not kept up with the rest of the industry in adding representatives but has been losing them in its home market.  Planned adjustments include cuts of $90 million in annual costs, spending of an additional $75 million on advertising, better compensation for sales representatives, and a speedier ordering system

Discounters & Department Stores

Target revamps stores for those in a rush, those who ramble

In a move to bring shoppers back to its stores, Target is embarking on an ambitious redesign aimed at helping people who need to dash in for milk to get out quickly while encouraging those who want to wander the aisles to linger.

The new layout was unveiled by CEO Brian Cornell in Las Vegas Monday. It will feature a separate entrance and 10-minute parking for shoppers looking to pick up an online order or some essentials. New center aisles will be curved rather than squared off, to inspire people to explore, says Mark Schindele, senior vice president of Target Properties. LED track lighting will replace fluorescent fixtures, and brand boutiques meant to replicate a specialty-store feel will showcase rotating looks.  The first of the redesigned stores will open in suburban Houston this fall. About 40 more stores will get the remodel treatment by October, using the Houston prototype as a template. More than 600 of Target’s 1,800 total locations are scheduled for updates over the next three years. It expects the remodeled stores to see a 2 percent to 4 percent sales bump.

With Sears’ future in doubt, vendors begin pulling back

Suppliers to Sears Holdings Corp told Reuters they are doubling down on defensive measures, such as reducing shipments and asking for better payment terms, to protect against the risk of nonpayment as the company warned about its finances.  The company’s disclosure turned the focus to its vendors as tension is expected to mount ahead of the key fourth-quarter selling season amid rising concern about a potential bankruptcy, they said.

The storied American retailer, whose roots date back to 1886, said on Tuesday that “substantial doubt exists related to the company’s ability to continue as a going concern.”

 Grocery & Restaurants

Oak Hill Capital Partners to Acquire Checkers & Rally’s Restaurants for $525 Million

Oak Hill Capital Partners announced today that it has entered into a definitive agreement to acquire Checkers Drive-In Restaurants, Inc. from Sentinel Capital Partners.  Operating under the Checkers and Rally’s banners, the Company is one of the nation’s leading operators and franchisors of drive-thru hamburger quick-service restaurants.  The aggregate value of the transaction is approximately $525 million.  Founded in 1986, Checkers has over 840 locations in 29 states and the District of Columbia.

Bibibop Asian Grill to acquire ShopHouse locations

Bibibop Asian Grill said Friday that it is the buyer of the leases for 15 closed ShopHouse Asian Kitchen locations, a deal that will double the Columbus, Ohio-based chain’s size virtually overnight. Bibibop is owned by Gosh Enterprises, the owner of Charley’s Philly Steaks, and currently operates 12 locations, with a 13th under development. The deal with Chipotle Mexican Grill Inc. for the shuttered ShopHouse locations will give the company 28 restaurants, once the locations are converted and the other unit opens.

Albertsons Said to Weigh Merger With Organic Grocer Sprouts

Albertsons Cos., the grocery-chain operator backed by Cerberus Capital Management, has held preliminary talks to merge with Sprouts Farmers Market Inc., people with knowledge of the matter said.  The discussions, which took place in recent weeks, are at an early stage and may not lead to a deal, said the people, who asked not to be named discussing private details. The talks have involved a plan to take organic grocer Sprouts private and add it to Albertsons’ portfolio, which includes eponymous grocery stores and the Safeway store brand.  Shares in Sprouts were little changed at $21.99 at 10:01 a.m. in New York, valuing the company at about $3 billion.

Home & Road

Sears’ $900M sale of Craftsman to Stanley Black & Decker ‘voidable’?

Sears Holdings warned that the recently announced sale of its Craftsman tool brand could fall apart if the ailing department-store chain goes broke by the time the deal is ready to close. The company said in a public filing Tuesday that the sale of Craftsman to Stanley Black & Decker could be “voidable, in whole or in part” if a court determines that Sears was insolvent at the time of the deal close or became insolvent because of it, among other conditions.

The Craftsman sale, a deal valued at about $900 million, was announced in January and completed March 9.

Revenge Of The Independent Hardware Stores

We all know the requiem for retail in the 21st century. The big-box megastores killed off the mom-and-pops. Amazon and e-commerce crushed brick-and-mortar. By the time the Great Recession hit, traditional retail was already toast — and the drop in consumer spending that came with the crisis burned it to a crisp.

Amid the general doom and gloom, though, there’s a particular industry segment that stands apart. Independent home-improvement retailers — a broad class that includes more than 35,000 hardware stores, lumberyards, garden supply centers and paint shops that make up 50 percent of the market — didn’t just survive the category-killing, market-disrupting, store-shuttering trio of challenges. By customizing product offerings to local needs and personalizing customer service, these plucky retailers are solidifying their status as a crucial component of a healthy Main Street economy.

Jewelry & Luxury 

Interview With President of Alex and Ani

This week, Cindy DiPietrantonio, who was appointed president of Alex and Ani last year, sat down for an interview with JCK at the Alex and Ani showroom in Tribeca in New York City. Here, the accessories veteran, who reports to founder and CEO Carolyn Rafaelian, talks how her “meaning-based” brand differs from Pandora, the possibility of an IPO, and Alex and Ani’s upcoming move into high-end and men’s lines:

We currently have precious in our line, and we are expanding that, under the label American 925. That collection will premiere this fall.  We are also coming out with a higher-end line much farther down the line.  We are also planning—and this is the first time we have announced this—a men’s line, Alex and Ani Men’s, that will launch next year.

Will Retail Help De Beers ‘Build Forever’?

Taking control of the De Beers Diamond Jewellers (DBDJ) retail operation from LVMH has completed De Beers transformation from a mining company into a diamond luxury group.  The acquisition means that not only is De Beers effectively spread across the entire diamond pipeline now, but it also has full control of its name, which the retail business was unable to leverage.

The partnership between De Beers and LVMH was, essentially, a failed one. DBDJ produced consistent losses; its most recently available report showed a net loss of $13.2 million in 2015 – largely due to high costs and operating expenses – even though sales rose 3 percent to $161.3 million that year.

Baselworld 2017 Opens with 13% Fewer Exhibitors

The message from executives who spoke at the Baselworld opening press conference on Wednesday was clear: We know the situation is bad, and we don’t really want to talk about it.  The annual watch and jewelry trade show kicks off in Switzerland amid a backdrop of lagging watch sales and geopolitical and economic uncertainties.  Swiss watch exports dropped 10 percent in value terms last year following a 3 percent decline in 2015. So far this year, they’re down 8 percent, according to figures from the Federation of the Swiss Watch Industry.

Baselworld has seen attendance slide for the past three years, and the number of exhibitors at this year’s show is down 13 percent year-over-year, from 1,500 to 1,300.

Office & Leisure

Bugaboo Grows Up With New Luggage Line, Campaign30

A decade ago, affluent moms clamored for a Bugaboo stroller, joining waitlists and spending, at the time, unseemly amounts on a what up until then had been considered basic gear for parenthood. The popularity reached a crescendo in 2011, with the debut of the coveted Donkey double stroller, which carried a price tag of a whopping $1,700 and was considered the ultimate status symbol for new moms.  This month, Bugaboo aims to get its groove back, and it’s not with just strollers. The 18-year-old brand is aiming to position itself as a mobility innovator with the introduction of a wheeled luggage set. Bugaboo is debuting its first global brand campaign beginning March 31 to market both strollers and suitcases.

GameStop to close 150 stores

Shares of GameStop slid more than 12% in afternoon trading Friday after the video game retailer reported a drop in fourth-quarter sales and announced plans to close at least 150 of its 7,500 stores worldwide.

GameStop faces increased competition from retailers such as Amazon, Best Buy and Walmart while more players purchase games digitally — whether on traditional gaming consoles or on their smartphones or tablets.

The video game and consumer electronics retailer’s woes are the latest example of a brick-and-mortar retailer impacted by consumers’ rush to purchase products online. J.C. Penney and Sears Holding have announced plans to shutter several locations.

Technology & Internet

What’s hot in retail technology investments for 2017

When it comes to technology budgets for the next year, retailers are focusing on getting the basics right,  and not on “shiny objects” like augmented reality and virtual reality that are unproven.  Omnichannel, personalization, analytics and digital store technology will be at the core of this year’s retail investments as digital leaders keep an eye out for case studies and ROI with the newer tech offerings.

Wal-Mart launching new investment team as its appetite for online retail grows was only the beginning. After snapping up a series of small online retailers, Wal-Mart said Monday that it is launching an innovation hub to identify the ideas, people and technologies that will drive the future of retail. Called Store No 8, the Silicon Valley-based team will invest in and partner with entrepreneurs, early-stage start-ups, venture capitalists, and academics. The stand-alone “incubator” will focus on areas including robots, virtual and augmented reality, and artificial intelligence.

Finance & Economy

Consumer Sentiment in U.S. Rises as Household Finances Improve

Consumer confidence rose in March as Americans were more satisfied than any time in 16 years with the current state of their finances and the economy, while remaining sharply divided along party lines about the outlook.  Households reported net gains in incomes and wealth at the strongest levels in a decade, while Republicans were “much more optimistic” than Democrats about expectations for their finances, according to the survey.

Mortgage applications fall 2.7%, as borrowers turn to riskier loans

The fast-rising cost of housing today is shrinking demand for home loans but also pushing those who are in the market toward cheaper, adjustable-rate mortgages.  Total mortgage application volume fell 2.7 percent last week from the previous week, according to the Mortgage Bankers Association. The seasonally adjusted tally stands nearly 12 percent lower than a year ago. Home prices continue to rise far faster than incomes, and those higher housing costs have borrowers searching for the best deals on home loans.