Pigeons on a Rail

Wal-Mart recently announced a new upscale format to attract the attention of affluent consumers. They’ll sell $500 bottles of wine and $5,000 pieces of jewelry. I was surprised (amused?) to see a multipage Wal-Mart ad for women’s clothes in Vogue.

Mass retailers are reaching for the top earners, the so-called luxury market. Both JC Penney and Sterling have plans for major expansions in the coming years, and the bulk of those will be freestanding locations. Getting out of malls, certainly midmarket and low-end malls, makes sense. Most retailers now know they need to make unique statements to their target market.

I also think they smell blood in the water. We are entering another round of winners and losers at every retail level.

Penney sees a weakened Sears, and Federated stores are drifting. Sterling is consistently profitable at a time when some main competitors are struggling to adapt to the market and make money. Sterling continues to fine-tune its Jared operation, which, like Wal-Mart, wants to dip further into the affluent public’s pocket.

Among independent jewelers, there are comparable moves. The trend started some years ago when stores left malls. Now many are building attractive destination stores. Recently, I spoke with two retailers, each of whom have several locations, that are shifting operations into better locations and significantly improving their merchandising. For many years they sold the midmarket. No more.

There is little doubt we are seeing a lot of elbowing and jostling as channels look to reposition themselves to get closer to the tastier morsels. It’s like watching pigeons on a rail as they push each other around while waiting for that nice lady who tosses out bread crumbs. Some birds are shoved off the end of the rail as bigger ones force themselves into that prime spot in the middle. Others flit around, ready to dive and grab something before the rest of the flock can.

We are seeing such jostling now, and we can expect more in spite of the inherent risks. Costco and Target have proved that the upper, middle, and lower economic tiers can shop in the same place. Their needs overlap, and the retailer can appeal to a broad spectrum.

Upscale jewelers can maintain their dominance in the luxury arena through competence, service, and selection. Still, the impact will be felt. Look at the Internet as an example of how a seemingly impersonal channel can have a profound effect on all retailers, including the very best.

This realignment continues the evolution of modern retailing, and we must be watchful of where it leads us. We need only think of the demise of entire retail formats— remember how big and powerful the catalog showroom business was in jewelry?—to know there’s an endless and winding road ahead.

And don’t forget that the nice lady does not care which pigeons are on the rail. She still has fun throwing out those crumbs.


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