The New Retail Reality

In this VMSD.com exclusive, fixture manufacturers drill down into the challenges and opportunities of recession-era retail.
By
|
Posted June 8, 2009

Consumers may be trading down from big tickets to Big Lots, but they still need retail therapy. So what kind of help do retailers want from vendors to make sure they get shoppers to notice (and buy) their value-for-money product lines? In this web exclusive, panelists on VMSD’s 2009 Fixture Manufacturers’ Roundtable outline their strategies for servicing retailers in a less material world. (For the portion of the roundtable that appeared in the June issue of VMSD, click  here.)

Participants included: Robert Frackleton, vp, Reeve Store Equipment Co., and president, Association for Retail Environments (A.R.E.); Robert Hardie, principal, Triad Mfg.; Mark Pritchard, executive vp, strategic business development, idX Corp.; Karin Pryor, vp, marketing, Leggett & Platt; Barry Rosenberg, ceo, Econoco and Stacey Santoro, director of new business development, Fleetwood Fixtures.

STATE OF THE MARKET

How will the rest of 2009 shape up in the retail sector?

Barry Rosenberg, Econoco: Our distributors tell me that all the chains that are still in business have sliced their budgets in half. In the wholesale market, I’m hearing that realistic numbers could be anywhere from a 20 to 50 percent drop in sales. From where I sit, 20 percent down is the new flat. But, we’re still seeing activity. Jos. A Bank singlehandedly revived my suit cover business, which was really the buggy whip business. The company’s (first quarter fiscal 2009) sales were up over 11 percent.

Stacy Santoro, Fleetwood Fixtures: We continue to have a client or two that will still do a flagship environment in a major metropolitan area but there’s no roll-out. It’s just the flagship; not the burst of the flagship and then five more stores.

Robert Hardie, Triad: It’s nearly impossible to identify a region where there isn’t some general weakness. If there’s some brightness, it’s Asia.

Mark Pritchard, idX: We’re reading a 30 to 37 percent decline in new building over the next year. That’s a challenge, true, but certain opportunistic retailers are taking advantage of some very good real estate deals and leaping into the market. Off-pricers are doing that. We’re also seeing some well-capitalized equity-owned retailers with premier product lines leveraging this lease market to grow. If you’ve got money, this is a great time to take business away from the competition.

Robert Frackelton, Reeve Store Equipment: There are some bright spots but they have nothing to do with geography. One of our sporting goods accounts is doing fairly well. Another consumer electronics account is forging ahead. Companies like these won’t be enough to carry the banner for the entire industry, but they’re showing there’s business being done.

What new avenues are you looking at to fill the gap?

Karin Pryor, Leggett & Platt: Discount is still very strong for us and obviously it’s an important part of our business, as well as mass merchants. We’re also seeing interest in the financial sector. The department store and specialty is where we view the most fall-off at the moment

Santoro: Fleetwood has been actively pursuing opportunities for hospitality, banking or for innovative workplace. We’re trying to reach out to some of our design firm partners that specialize in that type of work to figure out how we can collaborate in these non-retail sectors.

Hardie: We now pursue smaller orders in addition to the large-scale production runs we have done for years. We’ve have found ways to save money and are evaluating new markets and services that might be attractive right now -- healthcare, hospitality, banking, grocery, government contracts.

Pritchard: From a POP perspective, brands are taking control at the point of sale and point of shelf. They’re using their marketing dollars to try to create some buzz around their product lines. So we’re seeing some significant increase in POP that’s being driven specifically by the brands. Retailers are giving them more access.

We’ve just added a panel processing facility, IDX Panel Works, into our Louisville plant. That accounted for about $7 million worth of equipment. With this vertical integration, we can control costs on some of the raw board since we have a melamine processing plant there as well. The great thing there is it really does take us into the mass merchants and the big boxes in a big way. In those sectors, the push is toward melamine and laminate-based product. We’ve done this before with the POP and financial markets, and now we doing it to get into the mass merchant market.

Frackelton: We’ve been developing a plated finish that is less expensive and more importantly much less damaging to the environment than chrome. Yet it still has the reliability, the durability and the look and feel of chrome. Hopefully that will be a big growth area for us.

A BIGGER SERVICE MENU

How has the recession changed how you work with clients?

Frackelton: I have more time to go on store tours. Overall, we’re being asked for a broader scope of services. I got a call from someone at one of our accounts who was put into the position because the company had cut staff. The person didn’t know much about what the fixturing world all about and asked me to go through the store and evaluate it. I did and I came up with a whole list of “here’s what I think you should be changed, should be considered, some engineering ideas, etc. So, the economy is definitely changing how we work.

Pryor: Like everyone here, we’re seeing a lot more use of our design teams and our project management teams regarding take-offs and also for inventory management. There’s more creep in the scope of our projects.

Santoro: Even if it’s not a “problem” per se, the retailer may be looking to us to help them make something happen. For example we’ve heard a lot in the past year about clients who need help with graphics. Fleetwood’s not really a graphics provider. We can do a frame but we’ve never provided the images. In the past, graphics were something retailers handled on their own. But in the past year, even before this real downturn happened, we had more and more clients say to us, “Could you be this one-shop environment or could you recommend or tell us whom you would use as far supplying the images and graphics for our store?” They were looking for collaboration and advice. That led us down the path of what we did for GlobalShop in our display with (printer) Portland Color. Their clients had been saying, “You do a terrific job on our graphics but we now we need them integrated into a fixture. Do you have a recommendation on a fixture vendor?’ So I think it kind of a win-win approach and it seems to be something clients need.

Frackelton: We’ve also found that we’re doing logistics for the graphics. Where before we handled getting our parts to the store and the graphics company handled getting its materials there, we’re having all that stuff shipped to us and consolidating it on their behalf.

Santoro: What’s helpful is that they don’t lose things on the job site and it’s less work.

THE TRENDS

What’s the hottest and latest in fixture products?

Pryor: Retailers want a less heavy built-out architectural environment. Rather than building architecture or constructing walls, they’re looking to fixture makers to serve up a more flexible, creative and even sustainable environment through fixturing. They want a solution that allows displays to be moved around or disassembled after the fact. And they don’t want to have spent this tremendous amount of money on the build-out of the store.

Santoro: We’re seeing that, too. The ability to change product needs using standard hardware is important. Our clients don’t want to invest in a very specific or individualized hardware system, but something that’s interchangeable throughout the store We’re also creating fixtures that are branded by design from the client’s perspective with a unique and supporting identity for them. It’s not always about screaming the brand. It’s the style of it; the shape of it; the aesthetic of it that does exemplify the brand. We’re also really aware that a lot of clients are integrating a lot of technological materials into their fixtures because they need them to do more than one thing. Another trend is toward LED lighting or an LCD screen--something that’s more interactive from the customer’s standpoint.

Hardie: There’s a trend toward combining clean, modern pieces with those that reflect “found” aesthetics. Some can be more a stand-out art piece and others could disappear and serve just the purpose of holding capacity and display while still having the fresh composition.

Pritchard: Retailers are trying to differentiate from the competition so their needs vary and sort of change. So manufacturers support that with customization. Overall, we’re seeing more wood in the marketplace. Retailers are asking what will stand up stand up to the wear and tear of their retail space, so they’re looking at thermo-fused materials that you can put on a base, hit with a hammer and have them still look good. Modularity is becoming a big theme. Retailers want to be able to attach fixture a and fixture b together to create fixture c. So there’s more flexibility in how they can merchandise within the store. Injection molded components are coming into the retail area. That’s been somewhat of a product from the POP area but we’re seeing more and more retailers are asking us to tool up to create value added pieces that attach onto a shelf or onto a fixture using injection molding and vacuum formed sorts of products. It’s a cost effective way of making a branded look. It does mean you have to make a lot of them when you do that, but it is a way that they can differentiate their fixturing from somebody else.

QUALITY VS. PRICE

Where can retail designers save on fixtures without having to skimp and downgrade on quality?

Pritchard: I think they need to engage the fixture manufacturer earlier in the process and reach out to them from a partnership perspective. There are so many things you can look at, not just materials and finishes. Can you knock this down? Can this come in a smaller box? All of these things are not necessarily designed into the fixture at the initial stages and we spend a lot of time developing the look and feel. Then we go through the value engineering piece of the process. It be more efficient for everybody if value engineering happens earlier in the decision-making process.

Will retailers pay more to get durability and quality?

Rosenberg: That’s always been a much bigger concern in Europe. Durability is a very big factor for European companies. In the U.S., price and value engineering are the priorities.

Pritchard: Initially when professional procurement came into the supply chain, as long as the fixture looked like the fixture that was on the floor, it was fine. The reality is that there were a lot of retailers out there who found those fixtures wouldn’t last for more than two years. Seven years is kind of the norm in what they’re looking for. So I think they’ve started to understand that fixturing is a total value piece and they need to look at the longevity. Otherwise they’re going to be passing the problem along to an associate in two years’ time when the fixture starts to fall apart.

Frackelton: It’s sad but I think we’re behind the rest of the world in terms of durability and the lifecycle of fixtures. It just doesn’t come up because it’s more that short-term issue of “What am I going to have to pay?”. Hopefully, one lesson that we can take from this economic mess is that looking for short-term gains doesn’t pay in the long run.

Where can retailers and designers save on fixtures without scrimping?

Hardie: With metal and wood shops under one roof and a full engineering department, we use a structured methodology to recognize the lowest cost options in design, materials, finishes, and process. There’s also a lot to be said for value engineering when it comes to the design or the way a fixture is actually assembled. Overseas production is an option.

THE CHINA FACTOR

China’s been the engine that turned around previous recessions. Is it going to turn the tide again?

Pritchard: The market’s down but it isn’t down to the level that it is here. It’s still a fairly buoyant marketplace. There’s definitely is a trend toward Western retailing in China, specifically. Typically, Chinese retailers have been working with domestic manufacturers who can’t do big rollouts. So they’re looking to Western manufacturers to support the kind of retail platform they see over here.

Why can’t Chinese manufacturers do big rollouts?

Pritchard: From an infrastructure perspective, they tend to think about manufacturing the product, getting the okay and leaving it on the dock. They’re not working on the total value package of in-store presentation. Nor are they addressing the logistics of how to get product around the country for a client that’s opening two stores a day. One of the retailers we’re working with at the moment is doing just that -- opening two stores a day. And the company’s executives are looking to us to help them understand how to execute a major rollout and look at all aspects of the project, not just make the product.

What would like to say to retailers?

Frackelton: They have grow by taking advantage of the great real estate deals that are out there.

Pritchard: Do your homework. Make sure the companies you’re dealing with are going to be around and that they can meet your merchandise initiative. We just recently started working with a retailer that had a challenge. The company that was supporting them wasn’t able to support them going forward. We had to make fixtures in four of our facilities to meet their demand. It was exciting; it was great for everyone involved in it because it was successful, but I wouldn’t recommend that anyone get into that situation.