Archive for June, 2011

Can “daily deal” sites do a better targeting job?

Short answer to the question in the headline: Absolutely! The proliferation of Groupon-style sites is a hot topic on RetailWire, and here’s my take from a recent discussion:

Targeted “daily coupon” sites fit right into the evolutionary cycle of retailing. In the days of pure bricks-and-mortar, retail evolved from mass appeal (department stores and general merchandisers) to more targeted big box specialists. (There are relatively few general-appeal “nameplates” compared to 40 years ago.) You can point to the same trend in e-commerce, with targeted websites driven by a wealth of information about consumer preferences vs. sites aspiring to be “all things to all people.”

The same trend is happening fast on the “daily deal” front, even from sites like Groupon or Living Social. The trick is to ensure that the micro-targeting is not so focused that it misses some broader volume potential, and also to ensure a profitable outcome for participating merchants.

 

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Trial vs. loyalty: Two paths to market share

From a recent RetailWire discussion: The question of the day pertains to market share gains, and whether they are more achievable by prospecting new customers or catering better to existing customers. My opinion follows:

There is a “false choice” presented here. Obviously a new store needs to encourage trial in the first place, but an established store is smart to work on converting its “good” customers to “best” customers. If the retailer is successful earning higher share of wallet, it’s probably doing something right…and in today’s world of social networking and other reference groups, this sort of good execution is likely to drive new customers into the door.

 

JCP hires an Apple innovator (part 2)

A followup comment based on the news that the new JCP CEO was not originally given store responsibility…and some subsequent backtracking by the JCP board:

News flash (from today’s Wall Street Journal): The JCP board has now decided that Ron Johnson will have full responsibility as of next February 1st. Functional areas like stores will only report to Mike Ullman for a three-month window, starting when Mr. Johnson assumes the CEO title on November 1st. Apparently the board met over the weekend and pushed this timetable, since many board members were caught by surprise when they learned about the original transition plan.

Some lessons learned here:

1. If your company has “activist” board members who push the hiring of a new CEO, don’t leave them in the dark about a transition plan;
2. If you are hiring a new CEO, don’t muddy the waters with unclear lines of authority;
3. If you are hiring a CEO in order to reinvent the store experience (among other things), give him or her the responsibility needed to be a change agent from day one.

Penney is left with a short-term black eye in terms of corporate governance, and is also lowering expectations about when Mr. Johnson’s impact on the company will start to happen. (Current timetable: Fall 2012.) JCP didn’t need to let this happen, and to lose a lot of the positive momentum gained last week with the original hiring announcement.

 

JCPenney hires an Apple innovator (part 1)

JCPenney’s recent hiring of Ron Johnson (the driving force behind The Apple Store) was greeted with a lot of enthusiasm by Wall Street and by RetailWire panelists. In my opinion, Mr. Johnson has his hands full:

Mr. Johnson had the advantage (at Apple) of creating a store experience from scratch while working with a tightly edited, innovative, single-brand assortment. He will face a more complex challenge at JCP, especially because the company’s overassortment and lackluster positioning need to be addressed first in order to transform the store experience. No amount of re-engineering can disguise gaps in product development.

Is the traditional department store concept ripe for reinvention? Absolutely…and Ron Johnson is a great hire to make it happen. Is it going to be easy? Absolutely not…JCP has missed a golden opportunity (with the demise of May Department Stores) to become THE moderate, promotional alternative to Macy’s while a more innovative store operator (Kohl’s) has actually bypassed Penney in annual sales.

 

Are innovation and company heritage mutually exclusive?

From a recent RetailWire discussion about company brand positioning: Is there a natural (and unfixable) conflict between innovation and brand heritage? Or can the two reinforce each other? Here’s my opinion:

Achieving relevance to your target consumer does not mean that innovation and heritage are mutually exclusive. You can make an argument (using the example of Disney) that technology has led the company in innovative directions (e.g. Pixar) while staying true to its roots as the leading source of animated films in the world.

Surely the idea of innovation requires new platforms for delivering product, whether it’s live streaming of computer animation or e-commerce sites for formerly bricks-and-mortar retailers. The world is full of failed retailers (Blockbuster comes to mind) who didn’t stay relevant as customer preferences changed.

But another way to think of “heritage” is to define it as consistency of mission and brand position. In that case, “heritage” is not a negative but a core strength. It suggests that a company (retail, CPG or otherwise) knows who it is, and prepares itself to deliver its “brand promise” in new and innovative ways…even in Doug’s own example from the Bose stores.

 

Target makes a convenient target

Many critics of Target are overreacting, first in one direction and then the other, about their “consumables” strategy. Target was criticized for its lack of food and basics, and is now being roasted for having too many groceries. Long-term, this is an appropriate strategy for Target as long as its larger store formats can deliver well-priced and well-edited assortments of fresh and other foods.

The bigger short-term issue at Target is the merchandising of discretionary products. As one analyst pointed out yesterday, Target’s home business (one of its “legacy” businesses) is losing share even though the closing of Linens N’ Things should have helped. And Target’s softlines business (especially women’s) lacks a “core basic” element along with a clear point of view among its private brands.

Can Target be “fixed”? Of course, with some old-fashioned attention to its core assortments at the same time that it continues to build upon its “consumables” strategy.

 

Macy’s opens in an outlet mall (sort of)

A lot of hand-wringing recently on RetailWire with Macy’s announcement that it is opening a store in the Gurnee Mills mall north of Chicago. Here’s my contrarian point of view:

It helps to understand the marketplace in order to grasp why Macy’s chose this location. The closest Macy’s store is 15 miles to the south, and there is a lot of growth and population density around the far northern Chicago area. Meanwhile, the closest store to the north (opening next spring) is sixty miles away in suburban Milwaukee. There is clearly enough “commerce” in a trade area where nobody will be building a regional mall anytime soon.

The “outlet mall” in question (Gurnee Mills) is a Simon-run hybrid including big-box stores like Sears and Kohl’s. So there is really nothing incompatible about a Macy’s store in this location, assuming it’s a small-format store with the “My Macy’s” target merchandise strategy in place.


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