Archive for March, 2013

JCP reverses course (again) on its pricing strategy

JCP has become a favorite topic among RetailWire panelists, and no wonder: The missteps involved in the execution of its “reinvention” strategy will be fodder for textbooks and case studies for years to come. Today’s discussion concerns the reversal of Penney’s pricing policy at least for its private-label goods. (The company is marking these goods higher in order to run them on sale.) Here’s my take on the latest JCP change in tactics:

Based on my reading of JCPenney’s announcement earlier this week, the chain plans to raise prices on private brand goods (such as JCP, Worthington, Arizona and so on) in order to put them on sale. Meanwhile, it plans to continue its strategy of comparing branded goods’ prices to their MSRP. This is a “half-pregnant” pricing strategy that will only confuse the bargain-hunting consumer even further. And if JCP jacks up the prices of private label merchandise too far (for example, pricing a $6 tee at $10 in order to promote it at 40% off), its credibility goes out the window.

Is this enough to turn the tide? It’s hard to tell, but clearly the volume drop in 2012 made the original strategy unsustainable in terms of driving sales and margins. Even though the comp-store comparisons ought to be a walk in the park during 2013, it really depends on whether the new shops and merchandise content resonate both with the core bargain-hunter and the Millennial trend consumer that JCP wants to attract.

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The new buzzword: “Big Data”

“Big Data” is the hot topic in a lot of business articles these days, and is a catchy way of describing “data mining” of the information in a company’s data warehouse. The question discussed this week (on RetailWire) is whether retail companies are maximizing their use of “Big Data” in order to drive their business. My opinion? It’s a mixed report card so far:

It’s clear (without taking one side or another) that the Democrats managed “big data” more effectively than the Republicans in the last election. A lesson learned for all retailers and marketers: Put the time, effort and expense into your data warehouse and it will pay dividends. Among retailers, Amazon has long been at the top of the list for effective data management and addressing specific consumer interests. Macy’s probably leads the pack of more traditional omnichannel retailers, especially through its “My Macy’s” initiative and the micro-targeting of its print offers.

Bottom line: The capability is there because the top-tier retailers are already doing great things with “Big Data.” Those who aren’t prepared to make the same commitment will have to deal with the consequences.

Walmart vs. Publix: Battle of the tape totals

This week on RetailWire, panelists discussed an ad campaign in which Publix is fighting back against Walmart’s “Tape Total” spots running throughout the country. Panelists with more expertise about the grocery industry defended the move, based on Publix Stores’ high degree of loyalty in their marketplace. I”m not sure this is a winning argument for them in the long run:

On any given Walmart “shopping list” comparison ad, there are usually some items listed where the competition is actually lower even if Walmart wins on the tape total. It’s hard to verify whether the Publix list was cherry-picked to single out items where they were temporarily cheaper than Walmart because of price promotions — or whether these are legitimate, consistent price comparisons.

The real point is that the Walmart campaign is drawing blood. However, traditional grocers are playing on dangerous territory if they think they can beat Walmart on price over the long haul, or even make price the centerpiece of a marketing campaign. Better to figure out other ways to engender traffic and loyalty, especially in contrast to Walmart’s service standards.

CVS stirs up controversy

Many RetailWire panelists agreed with my point of view about CVS and its announced policy to charge a higher health care premium to employees who do not disclose health and weight issues. Beyond the legal aspects of privacy policies lies the broader issue of whether this is smart PR for a company in the healthcare business. Here’s my opinion:

I understand the merits of a healthier population bringing down the cost of health care and insurance, but in this case and similar ones the real issue is privacy. The punitive aspect of the policy (the extra $50 premium per month) might or might not stand up to the privacy guidelines in HIPAA and other legislation — somebody with more expertise would need to weigh in (so to speak) on that subject.

Does CVS intend merely to punish employees who don’t subject themselves to the health screenings, or do they plan to provide incentives (in the form of lower premiums) to those who lose weight, manage their cholesterol, and otherwise improve their health profile? I’m skeptical on the second possibility.

Target ads new online cookware brands

From a recent RetailWire discussion: Target has acquired two brands (cooking.com and Chef’s Catalog) to add to its online assortment. I see this as a smart long-term competitive move:

The home store used to be (but is no longer) a core strength of Target. In cookware especially, Target has seen share migrate to competitors like Kohl’s (with its Food Network products) and Bed Bath & Beyond. The impact on Target’s e-commerce business will be relatively small for the short term, but the opportunity to build new content and strategies for bricks-and-mortar should be significant.

Do loyalty programs work for Gen Y shoppers?

There has been plenty of discussion recently on RetailWire about the nature of store loyalty programs. Most panelists agree with me that most of these incentives really don’t accomplish their aim. The question at hand: Can these types of programs work any better for the Millennial consumer?

As panelists have discussed recently, most stores’ loyalty programs are really discounts by another name. These kinds of incentives will be important to Gen Y shoppers, who outnumber Boomers but do not have nearly the same level of spending power. However, it’s well documented that Gen Y shoppers will also respond to marketers that understand their interest in technology and the emotional connection of community. (“Peer marketing” might be a good way to describe it.) Finally, customized rather than mass media are essential to reaching this target most effectively.

Starbucks takes its loyalty program to the grocery shelf

From today’s RetailWire: A panel discussion about Starbucks’ new initiative to allow its loyalty-card customers to earn points when they purchase the brand at grocery stores, not just in its own locations. I think it’s another great idea that other retailers and brand managers can learn from:

Starbucks has always been at the leading edge of brand management, starting with the original concept of coffee as a premium drink (not a commodity) in an atmosphere conducive to socialization. Their loyalty program (unlike so many others) is not all about offering a discount at point of sale, but more focused on repeat visits by consumers committed to their product. Extending the reach of the program into grocery outlets — where their brand has plenty of competition for shelf space — is a powerful message to other marketers.


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