The end of suburban sprawl?

CNN published an interesting article titled Is America's suburban dream collapsing into a nightmare? It discusses the current mortgage crisis which is leaving some suburban neighborhoods largely vacated (and consequently, crime ridden) and the new trend of Americans looking for walkable neighborhoods where they have easy access to services.

Given today's (and likely tomorrow's) gas prices, people moving back into city centers does make sense, and many cities (including Rochester) are seeing renewed interest in downtown housing. Even further, in cities where the housing bubble really burst, there is no demand for suburban housing, resulting in vacant homes being occupied by criminal elements. Really, it's the reverse of what many areas have been seeing over the past few decades.

The potential flaw in the study is that while there is renewed interest in urban housing, from what I've seen, it's among 20-somethings and retired people. So, the question becomes, will families reembrace the urban lifestyle? Will they give up their giant backyards to save on fuel? And, frankly, will they have to do so? The study predicts that today's McMansions will have to be converted into low-income multi-unit housing.

Do I think this will occur? It's tough to say, but this scenario would have seemed unfathomable a few years back, and now I can see how it might occur. In my opinion, either Americans will have to do this, or they'll have to deal with driving smaller cars with less power as many people abroad do now. If I were to guess, I'd say we'll see a bit of both. And, the idea of improved conservation and our city centers being renourished is pretty exciting indeed.

Target: A Chink in the Armor?

Target Corporation has long been a Wall Street darling. Thanks to innovative branding and the creation of a distinct niche--upscale discounting--they've long been outperforming competitors thanks to higher margins. Recently, that trend has changed a bit. Some say it's due to the current economic situation that's forcing many to become more thrifty. Others say it's due to getting away from their customer focus.

Based upon a recent experience, I can't help but to wonder if it's at least partially due to the latter hypothesis. My fiancee and I registered there, and after her shower, we determined that we'd like to exchange an inexpensive Target brand nightstand for our guest room for the same exact one in a different color. The lack of a receipt--something that is common with gifts--proved to be a show stopper. And, supposedly, even managers can't make an exception despite this being a case of exchanging one unopened item for the same one in a different color.

So, I decided to write them on this issue. I got the standard copy-and-paste response regarding their return policy. So much for differentiating themselves from their primary "Goliath" competitor. It looks like we'll be hassling the gift giver, which should make for another unhappy customer. It's hard to believe that registries can't be leveraged to track such purchases. Luckily, I found another place with a more reasonable registry return policy. While I'll continue to patronize Target as I believe they do what they do well, if they're not careful, they could lose their competitive advantage thanks to inflexible corporate policies like this one.

Sears: Another Rough Holiday Season

Well, I posted in December and mentioned I was impressed with Sears' holiday marketing campaign. With a dip in holiday sales and the "release" of CEO Aylwin Lewis, it's clear that it didn't do the trick. Of course, Sears is hardly the only retailer that had a rough holiday season, but same store sales have been falling for some time now.

So, first off, was the campaign a failure? I don't necessarily think so. Unfortunately, marketing--by itself--cannot save a retailer. It has to be backed by a differentiated offering and superior customer experience. I think Sears did some things well this holiday season, but they still aren't capitalizing on their strongest brands while some stores need upgrading.

I think the "Can Sears be Saved" article in Forbes offers a pretty good analysis. Maybe the "Wish Book" campaign can still do this--it's just a case of better highlighting the brands. Then again, it might be easier to reposition the respective brands as category leaders by really focusing on them and making Sears the true background story--not that Sears needs another change in marketing strategy.

Assuming Lampert is serious about retail, it should be interesting to observe. They still have a powerful enough portfolio of brands to make a comeback, but the longer they take to get serious, the harder it's going to be.

Can Sears Rebound?

Sears has seen its same store sales and overall profit decrease recently. Since Edwart Lampert has taken over as chairman, some have wondered whether his emphasis on margins over store investment would ultimately hurt the chain. While the picture isn't nearly as bleak as it is for his other chain KMart, where the store experience is just terrible due to virtually no store investment and a lack of employees, improving the customer experience at Sears is critical.

I still wonder if his ultimate plan is to maximize upon the real estate value he holds through the two chains. For example, here in the Rochester area, Eastview Mall is a popular high-end mall. So I could see a new-to-the-area chain looking to buy out the Sears space, and then Sears would move across the street to the KMart space, as KMart isn't a good match for the market. If that were the case, it still makes investing in Sears stores very important.

On the bright side, I'm impressed with their holiday Wish Book campaign. The ads focus on the emotional side over just products by telling stories, and they seem to be using direct mail and newspapers to send out numerous "Wish Books" that reinforce the message and provide product information. It's the best campaign I've seen from Sears in years, and from visiting two stores recently, they seem to be trying to fulfill the promise. So, maybe they're starting to get it again.

The U.S. Dollar Weakens Further

For the first time in three decades, the Canadian dollar caught up to the American dollar. Due to problems in the housing and credit sectors, the Federal Reserve was forced to cut its interest rate by a half percent. Consequently, it made other currencies more attractive to investors. While it's good for what remains of the manufacturing sector, imports--which make up much of what people buy these days--and international trips are becoming even more costly. With the increasing cost of imports, inflation becomes a real threat.

This illustrates the adverse effects of this nation's deficit; hopefully international investors will continue to fund it. Retailers that depend heavily on imports and target price sensitive customers have reason for concern. It could be a difficult holiday season for them. Then again, this rate cut may keep some of those customers from losing their homes. Of course, inflation can drive up long-term mortgage rates anyway. So there's no guarantee there either.