Archive for April, 2013

The “black hole” of inventory management

RetailWire panelists spent time recently discussing the interlocking issues leading to chronic out-of-stocks, even in today’s era of improved technology solutions. My comment (which follows) points to inaccurate inventory tracking, which is a problem well within retailers’ ability to solve:

The promise of new technologies like RFID inventory tracking has not been met yet, since many retailers have not made the investments needed to make them work. So many retailers continued to be plagued by what I call the “black hole” of inventory management.

Specifically, stores may book receipts into their on-hand systems at the point of receipt at a distribution center (or even upon receiving an advance ship notice electronically from a vendor). There can be a gap of days between receipt in a store’s “system” and actual delivery of goods to a store. There may be additional delays if tight store payrolls (Walmart, anyone?) cause a breakdown in replenishment between the truck, the stockroom and the selling floor. Meanwhile, the buyer (or the replenishment system) thinks that goods are in stock and can’t figure out whey they aren’t selling.

Retailers are decades past the days where the solution to the “black hole” problem was out of reach. But it requires investments in technology and manpower to fix it.

JCP and Martha: Was the “juice worth the squeeze”?

It may be premature for RetailWire panelists to weigh in on the JCP/Macy’s/MSLO trial outcome, but we didn’t hold back. Here’s my point of view:

Without knowing exactly how the judge will issue his final ruling in this case, the JCP/Macy’s trial seems to be headed toward a “split decision.” I expect that JCP will be allowed to sell Martha-branded merchandise in non-exclusive categories like window treatments, but will need to sell Martha-designed products in “contract” categories under the JCP label. If I’m correct, this raises multiple questions:

1. Was the risk of infringing on the MSLO/Macy’s agreement worth it? Was the “juice worth the squeeze” in terms of how the Martha brand resonates with the new customer that Ron Johnson was trying to attract?

2. What does the entire chain of events say about Ron Johnson’s judgment? Clearly his recent firing by JCP reflects on a wide range of bad judgment calls, but this may have been the biggest public embarrassment.

3. If JCPenney ends up filling its new home stores with “JCP” product (instead of Martha Stewart), what did it gain?

On the last point, JCP has managed to develop product for which it is probably paying a rich licensing fee (and pricing it accordingly) after spending the cash to buy an interest in MSLO. “JCP at Home” could have been developed and sourced internally, for lower costs, sharper retails and better margins than this program is likely to produce.

Amazon targets the over-50 set

Amazon has set up a “store within the store” called 50+: Active and Healthy. It pulls together several categories and products aimed at the aging Baby Boomer (myself included). RetailWire panelists gave this idea mixed reviews, but I think it’s well worth the effort on Amazon’s part:

Great idea, and there’s no doubt that Amazon has the patience and IT expertise to find out what works and what doesn’t work, and to adapt accordingly along with their vendor providers. While the sheer number of Millennials is starting to surpass the Boomer population, there is no doubting the older group’s buying power.

Outside of chain drug stores — who have an opportunity to appeal to Boomers in a more focused way — it’s hard to see a brick-and-mortar concept that can offer the breadth of assortment found on Amazon. But there are certainly any number of specialty retail and service concepts that could do a better job catering to this population instead of always chasing the young.

Retailers struggle executing “omnichannel” strategies

There have been several RetailWire panel discussions about “omnichannel” execution in recent months; my latest comment is below. There is a handful of examples of how to do this right (Macy’s is a standout), but many more examples of stores who can’t seem to put together a coherent strategy:

I can think of a few reasons why “omnichannel” continues to be a problem, and I’m sure my fellow panelists can come up with several more. Here’s my short list:

1. Different pricing practices in store and online only lead to distrust on the part of the consumer, one way or another.
2. Many retailers don’t put the thought into “store design” of their website, to provide the same sort of ease of navigation or experience that their brick-and-mortar stores aspire to.
3. Too many retailers have drawn organizational lines between their brick-and-mortar teams and their e-commerce teams (especially in terms of merchandising and marketing). If companies don’t get their own employees on the same page, why should they expect customers to “get it”?
4. Seamless integration takes investments in capital, inventory and systems. Good execution of an e-commerce site doesn’t happen by accident.

Walmart tries to give its replenishment a SPARC

SPARC is an acronym for “Supplier Portal Allowing Retail Coverage.” and it’s an app allowing more visibility for Walmart’s vendors into its inventory levels — especially in its stockrooms. This is meant to allow WMT and its suppliers to overcome some of its recent and well-reported replenishment stumbles. Here’s my comment, from a recent RetailWire discussion:

SPARC looks like an extension of the collaborative planning and replenishment programs already in place between Walmart and its suppliers. If vendors have access to point of sale and other data, this makes perfect sense — especially as Walmart leverages its growing use of RFID technology. And, as the article points out, Walmart needs to take more cost-efficient steps in a hurry to solve its well-documented “empty shelves” problem.

JCPenney: End of the Johnson era, or end of story?

The end of Ron Johnson’s tenure at JCPenney came with unexpected speed this week. (In my case, it happened just before I taught a class of retailing management students about “retail pricing,” and I had a wealth of extra talking points to use.) It’s only been a few days since his firing — and the rehiring of his predecessor Mike Ullman — so there will be plenty of time for RetailWire panelists to mull over the events of the past 18 months. Meanwhile, here’s my immediate reaction:

Mr. Ackman’s vote of “no confidence” last week signaled that the crisis of operating results at JCP showed no signs of improvement. His fellow board members appeared extraordinarily passive during the past 18 months of Ron Johnson’s stewardship. Selecting Mike Ullman to step in appears at first glance to be an attempt to stop the bleeding and save the company, not another stab at “reinvention.”

You can make a case that JCP stores and assortments look crisper and more updated than before, but it’s hard to know whether the new shops (e.g. Joe Fresh) are gaining any traction. But Mr. Ullman (or his eventual successor) has a big task in front of him, starting with the need to drive sales volume. As I’ve pointed out repeatedly, the collapse of JCP’s sales in the last year made the rest of the operating model (margins and profits) unsustainable.

Whether Mike Ullman is the right man for the urgent job ahead of him remains to be seen. He is likely to bring some needed stability to the organization (and the vendor community) but did not move JCP forward during his last tenure as CEO. In the meantime, Ron Johnson’s short stint at JCP should provide cautionary lessons about the need to test new strategies and the dangers of a passive board being steered by an “activist” member.

Have smartphones killed sales at the checkout lane?

Today’s RetailWire panel discussion tackles the issue of declining impulse sales at store checkout lanes. While the premise of the article under discussion puts the blame on mobile phones (and users who are checking e-mail instead of buying candy or soda), most panelists agree with me that there are other underlying issues:

I’m skeptical about whether the use of smartphones has really killed demand for gum and candy in the past year, but I have a few other theories for the decline in register endcap sales:

1. How many registers are open on a consistent basis in discounters or grocery stores? Any staffing cutbacks (such as the well-publicized ones at Walmart) are going to translate into fewer open lines, and self-checkout is only speeding that process in drug and food stores.

2. Print media are in rapid decline because of the rise of online versions of magazines and newspapers. Why pay for a copy of People when you can read it online? It’s no coincidence that Time Warner is working to spin off its print division.

3. Finally, most stores depending on checkout endcaps to drive impulse sales do it in an unimaginative way. This prime real estate has been occupied by the same types of merchandise (see point #2) for as long as I can remember.