Archive for the 'Uncategorized' 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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Target’s brand position: We’re easy

Target is focused on “ease of shopping” as it refines its brand equity. My question (from RetailWire)…is it a credible claim, and can Target really sustain a competitive advantage here? Here’s my comment:

What makes Target “easier” than Walmart or Amazon? It’s a good tagline but is it supported by the facts? Target has a reputation for stockouts and other supply chain issues that a slogan by itself won’t cure. The company has a lot to prove, especially in light of Walmart’s laser focus on the same issue. Case in point: The new Walmart ad where the dad drives through in his PJ’s to pick up breakfast-in-bed fixings.

Inventory management? It depends on the inventory

I commented recently (on RetailWire) about the skill set needed to manage different kinds of inventory. There is no hard and fast rule, because it depends on whether the store in question is in the “staple” or “fashion” business:

Any store needs to hit the right balance between staple, fashion and fad merchandise. (The difference being that “fads” have a much shorter life span unless they evolve into fashion trends with more staying power.) The question of “the right balance” really depends on the nature of the retailer’s brand image and target customer. Clearly Forever 21 needs to play in a completely different world than (say) Chicos — which is not devoid of fashion but is more dependent on staple inventory.

It’s a key question because the product life cycle of each type of merchandise — and the inventory management needed to get into and out of trends profitably — may be totally different for fads, fashion and “basics.” Retailers don’t want to be stuck with too much of a fast-moving fad; on the other hand, they don’t want to erode their in-stock levels on basics by fixating on chasing trends.

Another post-mortem on Bon Ton Stores

Because Bon Ton Stores (soon to close at this writing) is based here in Milwaukee, I’ve paid close attention to the reasons behind its demise. Here are some thoughts from a recent RetailWire panel discussion:

One key lesson: The merger of two strong players will almost always work better than the combination of weaker stores. The Macy’s-May deal included the market share leader in almost every major city in the country, even though Macy’s was criticized at the time for changing the nameplates of chains like Marshall Field’s and Famous-Barr. Meanwhile, Bon-Ton’s acquisition of stores like Carson’s and Younkers (and then choosing to maintain “local” identities) was saddled by debt and by the lack of national scale or brand equity.

Milwaukee (where I live) is one of Bon-Ton’s two “headquarters” cities, and the home of its Boston Store nameplate. As an observer, I find the CEO revolving door was an issue and the company’s slow pace of e-commerce development (compared to Macy’s and Kohl’s) didn’t help either. And as a shopper, Boston Store’s content seemed overly focused on “career” Boomers who are retiring from the workforce, without a strategy to replace them with goods for younger customers.

Can mall anchors use space more creatively?

The following comment (from RetailWire) was triggered by a discussion about Macy’s plans to do more short-duration space allocation. I think it’s a good idea for other stores if they can adapt to the fluid mindset necessary to pull it off:

Macy’s has long experimented with the concept of pop-up space in its Herald Square flagship, because it has the space to be flexible. There is a constant stream of short-duration shops, especially on the main floor — but this is a luxury that most department stores (including Macy’s) can’t or choose not to afford.

Department stores’ use of their square footage has long been dominated by the same businesses (starting with cosmetics and handbags on the main floor) or the same “prestige” apparel brands, supplemented by exclusive brands. It’s hard to shake loose from this mentality when it’s all about space allocation and vendor agreements instead of focusing on a shopper looking for newness. (And by “newness,” I don’t mean next month’s new shipment of product from the same old vendors.)

There was an article in the Wall Street Journal over the weekend, with the scion of The Bon-Ton Stores (soon to close) regretting in hindsight his company’s failure to be more innovative. This is the problem in a nutshell: The “we’ve always done it this way” syndrome.

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.

How omnichannel makes inventory management tougher

RetailWire panelists recently had plenty to say about the supply-chain challenges triggered by stores’ push into omnichannel programs. Here’s my brief comment:

One cause of volatility is the growth of “ship from store” fulfillment of e-commerce orders (rather than shipping from a dedicated distribution center). This makes it harder to track sales and inventories at the individual location level, and makes replenishment more unpredictable. If e-commerce order fulfillment is totally randomized from one brick-and-mortar location to another (depending on who has the goods in stock and the costs of shipping), the customer looking for something on an actual store visit is more likely to be disappointed.

And here’s an additional comment on the same topic, specific to Target’s challenges:

Given Target’s spotty history of in-stock rates in its brick and mortar stores, there is a risk involved in depending too heavily on “ship from store.” As the Braintrust discussed a week ago, using stores as mini-distribution centers makes it tougher to assess actual demand in a given location accurately — in turn making replenishment more unpredictable. So if the “flow center” concept helps Target address this problem…good idea and worth rolling out to other regions.

And, finally, a comment about how Best Buy is successfully addressing the same issues:

Demand planning has become more complicated with the onset of omnichannel initiatives like “Buy online – pickup in store” and “Ship from store.” It makes forecasting by location more difficult if physical stores are also being used as mini-warehouses. Retailers run the risk of alienating customers who have made the effort to shop at a physical store, if they can’t find what they want in stock.

Best Buy has long been a leader in helping customers use the website to identify in-stock levels at their nearest store. But the company obviously decided that this wasn’t enough, and only a boost in stock levels would drive more sales. Retailers often get rewarded by Wall Street for driving down their comp-store inventories, but perhaps Best Buy’s results will point in a smarter direction.


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