Archive for the 'Corporate culture' Category

New management at Lowe’s

Marvin Ellison recently left JCPenney (see comments above) to take over the chairmanship at Lowe’s. This is probably a better fit, given his background at Home Depot, and he was quick to reorganize the C-suite. My comment (on RetailWire) raises the question of whether these were the right steps to take:

Mr. Ellison is finishing his second week on the job, so it’s premature to judge the reorganization or anything else he’s done. The newly created positions (stores and supply chain) may be needed but they appear from the outside to be more operations-oriented than customer-facing. It’s too early to tell whether this kind of approach is meant to improve operating margins or to truly recapture some of the market share being won by Home Depot. That may take a deeper dive into Lowe’s strategy than what we’re seeing so far.

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What should the new Penney CEO do first?

Here are a couple of related posts (from RetailWire) about the future of JCP. The first one notes the departure of CEO Marvin Ellison for Lowe’s, and the second post joins the debate about whether Penney can appeal to both Boomers and Millennials:

JCP continues to have a sales problem; its comp-store sales for 2017 and the first quarter of 2018 lagged its competitors and failed to take advantage of the continuing decline of Sears. Kohl’s experienced similar weather issues in Q1 but managed to deliver a 3.6% store-for-store sales increase.

It sounds like 20/20 hindsight, but Mr. Ellison operated in a comfort zone since joining Penney, based on his long background at Home Depot. (And now he is really moving back into that comfort zone.) The push toward home goods — especially major appliances — appears not to be the answer to Penney’s lackluster sales.

When Penney finds a suitable replacement, I expect the company to accelerate its store closure program — unless there is opportunity by heading in the opposite direction and picking up sites from Bon Ton, Sears and so forth. But Mr. Ellison’s strategic retreat (while Kohl’s pushed to maintain its store base as part of an omnichannel strategy) looks like a mistake from here.

And another post more focused on customer segmentation:

JCPenney has presented its investors (and consumers) with a false choice over the past several years, even predating the Ron Johnson era. Either “cater to our current core market of aging Baby Boomers” or “figure out how to attract Millennials.” Any store expecting to be sustainable in the long run needs to figure out how to do both.

It’s possible to carry robust assortments of both Liz Claiborne and brands targeted to younger shoppers, especially in women’s apparel. Without those younger consumers with increasing spending power to accompany their sheer numbers, the “old” JCP base will continue to shrink.

It will become clear that Marvin Ellison made a mistake shrinking the footprint of Penney’s “softlines” businesses in order to squeeze in major appliances and more furniture. In hindsight, JCP could have used this space to offer broader and deeper assortments of apparel and accessories targeted to both Millennials and their moms.

Did L.L. Bean need to change its return policy?

L.L. Bean got plenty of publicity when it announced a change to its longstanding policy of “no questions asked” returns. Apparently the cost of abusive returns (products bought at yard sales, twenty-year-old clothing with normal wear and tear) was an unsustainable cost of doing business — to the tune of a reported $50 million annually. The RetailWire panel discussed whether this was a good strategic move, and here’s my point of view:

L.L. Bean is among the last retailers to abandon “no questions asked” return policies. The company is right that abuses of the policy make it unsustainable. A cost of $50 million per year has been reported, although it’s not clear whether this is the cost of “abusive” returns or all returns. I’ve noticed other companies with generous policies (Kohl’s, for example) tightening their processes, in part to avoid being swamped by e-commerce returns to physical stores.

Loyal shoppers will not be put off by the change, but L.L.Bean took a PR hit because of widespread media coverage. There was a missed opportunity to manage the message more effectively, even if the decision was justified, given that the policy was a central branding message.

Reflecting on the impact of IKEA

Most of the obituaries of IKEA’s recently deceased founder focused on his background, but RetailWire panelists reflected instead on what the store’s operating model has meant to the world of retail. Here are my thoughts on IKEA’s impact and the store experience:

IKEA revolutionized furniture and home furnishings retailing in several ways. It developed a low-cost operating and sourcing culture that passed along savings to its customers, developing an almost cult-like global reputation in the process. For all the jokes about the difficulty of assembling IKEA furniture, there is no doubt that millions of customers own home furnishings of decent quality that would once have been out of reach.

As to the in-store experience, I shopped the IKEA at the Mall of America last summer and it seemed noticeably easier to navigate than I remembered. (And yet I worked my way through the entire store.) Maybe IKEA has taken seriously the critique that its shoppers are like lab mice lost in a maze.

And yes to the meatballs…but don’t miss the lingonberry preserves near the checkout lanes!

Retailers’ comfort level with change

Hiring people comfortable with the fast pace of change, and able to adapt to uncertainty, has always been a critical part of the retail equation. On RetailWire, I add this point about how technology is speeding the pace of change:

Technology and the growth of e-commerce have accelerated the pace, but retailing has always needed attract talent who are comfortable with change. An attitude of “We’ve always done it this way” or “This worked last year” is the kiss of death when most retailers’ fate is in the hands of their customers. While retailers don’t want to be purely reactive and tactical, they do need to attract associates with the sense of urgency needed to move quickly.

No, “Big Data” isn’t dead

A recent RetailWire discussion (with the premise that “Big Data” is dead as a retailing management tool) provoked a lot of response. My point of view is that data science combined with action is alive and well:

If you read the recent WSJ interview with the chairman of Fast Retailing (Uniqlo), you might have seen this perceptive comment: “Data would never substitute the merchant. How do you interpret the data? That’s the merchant’s skill set. You need to uncover the insight that is buried in the data and the merchants need to uncover it. Even if you employ artificial intelligence to help you, the numbers [don’t tell] the future.” His point is well taken: No matter how much importance a retail organization places on its ability to extract data from its transactions, the information means nothing if it can’t be turned into action — and some of that decision-making rests on instinct and experience.

That being said, declaring that “Big Data is dead” is an overreaction. The phrase itself may be overused, but data science is alive and well in the interest of smarter merchandising decisions, loyalty programs and so forth. Would Amazon be where it is today without groundbreaking use of data to develop its predictive technology? I don’t think so.

Amazon pushes Whole Foods toward centralization

There has been plenty of comment — most of it critical — about Amazon’s intention to centralize its merchandising of the Whole Foods stores. Most of the critics are concerned that the lack of local brand advocacy will turn Whole Foods into something very different. Here’s my RetailWire comment on that topic, followed by a comment about what Kroger is doing in response:

Centralized buying will bring economies of scale that allow Whole Foods to compete more effectively on price and on execution. But competitors (Kroger, I believe, is one example) are already opening the door to local vendors in response to the Whole Foods move.

Let’s not forget, however, that Amazon is the master of data science when it comes to retail management. Just because they are tightening the screws on the buying process doesn’t mean that they will ignore local preferences. In fact, they are likely to do a better job of allocating space and replenishing goods to meet individual stores’ tastes than Whole Foods ever dreamed of.

And now my comment about Kroger’s announcement that it is encouraging more local vendors:

Whether this was a pre-existing strategy or a reaction to the Whole Foods “centralization” news, it’s a good idea especially for grocers with national scale to pay attention to local preferences. As I said last week, however, don’t assume that Amazon will ignore this issue just because it is trying to find cost savings in the Whole Foods model in order to compete.

Amazon is the leader in using data science to determine consumer preferences, and I expect this to extend to their assortment planning in individual Whole Foods stores. If Kroger intends to compete, it will want to support its “local” initiative with great execution of in-stock levels.

 


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