The Brand Man Speaks

Mervyn's likely to file for bankruptcy soon as retail brand loses focus

Mervyn's a lower-end department store chain apparently is on the verge of bankruptcy according to numerous retail financial sources.

The retailer who competes with TJ Maxx, Ross, Stein-Mart among others has found itself facing tough economic times and its private equity owner isn't willing to keep shelling money into the organization and may pull the plug very shortly.

It has been reported (LA Times Story ) that Mervyn's is having a difficult time getting vendors who are demanding cash upfront from the cash-strapped company to send it back to school merchandise on credit. In an interview I gave the LA Times I said that it is critical for the retail brand to have back to school products in house soon as this is an important profit generating event for retailers and will be driven by price this season which favors the lower end retailers. I also believe many retailers are going to move up the launch date of their back to school push to "grab" consumers money while they still have it and before spending is pulled back even further than it has already been.

Mervyn's doesn't have a brand focus--it lost it some years ago--(what do they stand for? What is their brand promise?...very unclear) and in tough times consumers narrow their retail choices to trusted, clear brand positioned value oriented ones, like WalMart.

Their lack of identity has made them vulnerable not only to big box retailers like WalMart but also Target and Kohl's among a host of others.

The company has been closing locations (it has 177 stores of which 129 are in California) since it was sold by Target Corp. in 2004 to a group of investors led by private investment firms Sun Capital Partners Inc. and Cerberus Capital Management who acquired Mervyns for $1.2 billion. Private equity firms are far less forgiving when the numbers go sour.

Recently Linen and Things began suffering the same fate when it found itself forced to pay cash upfront for goods from vendors due to financial difficulties and tighter strings from its private equity investors. They have started to close under-performing stores nationwide but the outlook for them remains bleak.

Watching out for you everyday.

Eli

Absolut Vodka to imbed brand symbol in Hollywood Walk of Fame

In a brilliant marketing move that will undoubtedly generate calls for boycotts Absolut Vodka has apparently inked a deal in the six figures to put a star-like symbol along with their brand logo in the cement along one of the many Hollywood streets that commemorate entertainment notables.

This iconic environment has heretofore been untouched by such blatant commercialism, however, the State of California and its respective cities and municipalities are in deep financial trouble...in the billions of dollars....and are looking for any and all ways to raise revenue other than through tax increases. In this case Hollywood needs millions to refurbish the famous Walk of Fame streets as the "stars" are in bad shape in many places.

The Hollywood Walk of Fame is world renown. This move letting Absolut drop an image along side the stars of Gregory Peck, Sammy Davis Jr., Tony Curtis, Marilyn Monroe etal....will open a Pandora's box. Will Tide and Crest Toothpaste be cemented in next to Frank Sinatra and Doris Day for a small fee?

I suspect a backlash will be expressed but outside of LA I am sure not too many people will care. It is a shame but not unexpected in these times where anything and everything is for sale.

I will update this story more tomorrow after the LA Times article appears along with my commentary with a link to read it.

Watching out for you everyday.

Eli

WalMart (finally) in smart move drops trendy women's apparel line

Several years ago WalMart made a major brand strategy mistake by attempting to compete with Target by adding higher priced trendy women's apparel to its stores. The merchandising idea failed miserably simply because the concept ran contrary to WalMart's core reason for being; value priced merchandise everyday. It also potentially undermined the core customer's belief that the store had the best prices for all products they sold. Seeing higher priced goods sent some consumers to dollar stores perceiving WalMart was getting expensive.

After that failure WalMart continued to believe it could still make higher margins with women's apparel by selling higher priced apparel online where it claimed it had cultivated higher income consumer loyalty. The online brand z.b.d. did not flourish.

According to MSNBC.com , WalMart has finally formally accepted the fact that higher priced and trendy apparel is NOT their game and is eliminating the z.b.d line from their website.

WalMart sales have been particularly good in this inflationary/recessionary time because they are focusing on offering a wide selection of basic products to consumers at very low prices....this was Sam Walton's original brand promise and the company is moving back on track and enjoying the benefits of a consistent brand strategy.

Watching out for you everyday.

Eli

Will InBev's purchase of Anheuser-Busch "Bud" brand impact brand loyalty?

Belgian beverage giant InBev is in process of buying American icon brand Anheuser-Busch for $52 Billion. Although mergers like this are not uncommon, few bring marketing challenges to the table as this one does.

Bud and Bud Light brands have become part of the fabric of American culture. A-B has spent millions of dollars in advertising promoting their all-American brands that speak of patriotism and good 'ole American way of life. They have spent a fortune behind sporting events and sports stars embedding their "brand" into the daily lives of millions of Americans.

Although the A-B business has been languishing lately because of American's increased interest in other adult beverages, their brands remain big sellers with strong brand loyalty among middle American beer drinkers.

No one knows yet how InBev will proceed, however, the company does not have a reputation of spending tons on advertising. Quite the contrary. They spend far less than most beer marketers. This puts into question lucrative sports sponsorship deals that have "supported" American professional sports for many years.

The biggest question is (and this may become a significant case study to follow) will a foreign owner of A-B brands erode brand loyalty simply because American beer drinkers will feel one of "their own" has been "stolen" away from them? Will consumers boycott the brand because of the impending sale? Will this give a huge marketshare boost to Miller brands?

Although InBev is buying A-B because they see a huge international expansion opportunity for the Bud brands, they also know they cannot afford to lose any marketshare in the US. The ultimate irony would be for the A-B brands to become very successful overseas simply because of the brand image developed in the US while the brands diminish into third tier performers in the US.

We will follow this ownership change and its impact on brand strategy closely over the coming months and update this blog accordingly.

What's your opinion on this purchase? Let us know.

Watching out for you everyday.

Eli

US Airways is no longer a legacy airline

US Airways which along with virtually all airlines except Southwest and Jet Blue is facing on-going financial strains to stay in the skies.

Besides baggage charges and higher airfares US Airways has now eliminated on-board movies (just when low cost airlines are upping their entertainment amenities) and will charge for all beverages including coffee and tea service. As reported by the Brand Man Speaks in a previous post, US Airways is consistently at the top or near the top of the list of airlines proving terrible customer service.

I think it is time to re-segment the airline industry by adding a new category. Floating between Legacy Airlines (Delta, American, United) and low cost carriers (Southwest, Jet Blue, Virgin America) is "High Cost-no Frills". US Airways is now the only member of this new group and if they stay true to their new brand positioning they should be out of business within a year's time. Who wants to pay top dollar for no service? Not me. Probably not you either.

Watching out for you everyday.

Eli