Top 10 of 2013

Penney for your thoughts? It crowded everything else out this year
By
|
Posted December 16, 2013

JCPenney Co. Inc. (Plano, Texas) spent much of 2013 trying to reverse every initiative introduced over the last two years by its former ceo Ron Johnson.

It consolidated its three tiers of pricing back into one: “fake sale prices.” It took down pictures of the Apple logo from the company’s executive suite. It cancelled orders for “special sale” $4000 Manolo Blahnik alligator pumps for its shoe departments. It tried to regain the “core customers” it had lost by hosting a series of luncheons at the local Denny’s. It restored most of its old management, even holding a séance to try reviving the ghost of James Cash Penney.

And it announced it would open for the holidays this year on Thanksgiving evening, just like Macy’s.

Macy’s sued.

Exaggerations, of course, but only slightly. JCPenney inhaled all the oxygen from the retail world this year by an almost daily parade of news – little of it good. Whether it was being dragged through court by Macy’s or being dragged through the headlines by its board of directors, the once-private retailer had to endure 12 months of continual very public embarrassment.

Was it the only retail story of the year? No. But it was certainly the biggest.

1) A PENNEY SAVED

In April, shortly after announcing “big mistakes had been made,” Ron Johnson resigned as ceo of JCPenney. What had begun 17 months earlier with a flurry of promising initiatives – new logo, new ad campaign, new pricing policy, new Sunday circulars – came crashing down in an avalanche of management changes, public ridicule, alienated customers and plunging sales, revenues and stock price for the 111-year-old company that had always valued privacy and dignity above all.

Shareholder and board member William Ackman cried the loudest for a change in management, even urging former ceo Allen Questrom to return. JCPenney didn’t go that far back into the past, but it did ask Myron (Mike) Ullman, the executive Johnson had replaced in 2011, to come back as ceo.

Ullman has restored several of the retailer’s old strategems, including sales prices and coupons. Ackman has left the board. And JCPenney has been trying to fend off anonymous attacks on Twitter posts that it had hired a bankruptcy attorney.

2) DAY AFTER DAY IN COURT

One of the last legacies of the Ron Johnson era at JCPenney was the ill-advised deal he made with Martha Stewart to produce a line of exclusive merchandise. Not a bad move on its face, except that Stewart’s company was already producing a line of merchandise exclusively for Macy’s.

Johnson probably didn’t help his case, whatever it was, by chortling in private (LOL) emails to his colleagues that “we put Terry in a corner tonight” and “Terry may have a headache tonight,” referring to Macy’s ceo Terry Lundgren.

After months in court, JCPenney and Stewart finally augmented their agreement, severely cutting back on the Martha Stewart merchandise JCPenney would carry, protecting Macy’s exclusivity in the brand’s housewares.

It was regarded as a major victory for Macy’s and the end of a very bad year for JCPenney.

3) ZIMMER DOWN 

On an otherwise cloudless summer day in June, George Zimmer was suddenly fired by Men’s Wearhouse. Not only had Zimmer founded the 40-year-old menswear chain, but he also was the soothing voice in the ad campaign promising that “You’re going to like the way you look; I guarantee it.”

The action was the culmination of disputes Zimmer was having with ceo Doug Ewert and other board members about the future direction of the Houston-based chain.

For weeks, conjecture raged about whether Zimmer could wrest back control of his company or whether he might latch on with a competitor – such as Jos. A. Bank.

By year-end, Bank had made an acquisition offer for Men’s Wearhouse, was turned down and Zimmer had disappeared from the radar screen.

4) APPLE STYLE

Apple Inc. has always been considered the most fashionable of the consumer technology companies, but its products remain electronic. So what exactly does the computer company have in mind with three of its most recent hires – Angela Ahrendts, ceo of Burberry, to lead the Apple retail and online stores’ “strategic direction, expansion and operation;” Paul Deneve, former ceo and president of Yves Saint Laurent, as a vp in charge of “special projects;” and Enrique Atienza, a senior vp at Levi Strauss, to head Apple’s U.S. retail efforts?

In an internal memo explaining the Ahrendts hire, ceo Tim Cook said: “She shares our values and our focus on innovation. She places the same strong emphasis as we do on the customer experience. She cares deeply about people and embraces our view that our most important resource and our soul is our people. She believes in enriching the lives of others and she is wicked smart. Angela has shown herself to be an extraordinary leader throughout her career and has a proven track record. She led Burberry through a period of phenomenal growth with a focus on brand, culture, core values and the power of positive energy.”

The message, presumably, is that smart, capable people are good investments for high-tech companies, even if they’ve been spending their time lately selling plaid scarves.

5) THE STORY IS INNOVATION

As the glacier of Amazon bears down on physical retailing (now Walmart must know how all those village Mom-and-Pops felt), retailers are being urged to “be innovative – break out of the envelope – think creatively.”

To which many retailers are answering, “OK, but how?”

A great many people are citing the current New York retail experiment called Story. It’s been called “retail’s most creative new venture” that “redefines the shopping experience.”

“It” is a store created in the cycle of a monthly magazine, perhaps not surprising since the inventor is a former magazine editor. The store entirely updates its theme and its products every 4-8 weeks.

Founder Rachel Shechtman has explained her concept: “When we think of the next generation of retail design, we think about storytelling. My rule: 70 percent of an experience should be what consumers know and 30 percent should be surprise and delight.

“Take a pretzel, for example. Everyone knows what it is, and there’s not much product differentiation. But you put it in a bag with black-and-white stripes that look like the Empire State Building, and suddenly consumers think, ‘Oh my God, this is so cool.’

“Why are people going to brick and mortars at all? For the experience.”

Of course, not every retailer can reinvent itself every month or two. That’s not the message. The messages are: [1] Innovation is there, you just have to really think about it; and [2] Magazine editors are the smartest, coolest people!

6) GREAT NORTHERN

Nordstrom. Target. Marshalls. J.Crew. Bloomingdale’s. Microsoft. All are U.S. retailers who have indicated, or are rumored to be considering, plans to open stores in Canada.

Saks Inc. was acquired by Hudson’s Bay Co., the singularly Canadian retail organization, raising suggestions that Saks Fifth Avenue might venture North – or, perhaps, Lord & Taylor, HBC’s other U.S. property.

One of the new owners of Neiman Marcus is the Canadian Pension Plan Investment Board, which manages $188 billion in assets for 18 million Canadians.

The Canadians are fashionable and they’re familiar with U.S. brands, the economy’s stable, the language is the same (mostly) and the market appears welcoming.

Something’s in the water up there besides trout.

7) BROKEN CHINA

China, on the other hand, has begun to show cracks in its formidable economic façade – at least for foreign retailers. The market’s huge, we know that. But for some it’s been unwelcoming.

Tesco has pulled out. Best Buy struggled and fled. Burberry has shut half its stores there. Home Depot has closed all seven of its stores. Vivienne Westwood has decided to forgo Chinese expansion for the moment. Macy’s is cancelling its online plans there. Walmart had to restructure its China apparatus and close several stores after encountering the kind of competition it rarely finds in other markets.

Yum! Brands (KFC and Pizza Hut) is struggling. Starbucks and McDonald’s are hanging on, but Chinese people don’t really like the taste of McDonald’s food and can’t afford Starbucks coffee. (Starbucks has also been very publicly reprimanded on Chinese radio and TV for its high prices.)

Right now, it’s the American cachet that’s working. But as retailers know, cachet can cash out.

8) LET’S GET PHYGITAL

The buzzword of the year has been “omni-channeling.” Retailers are being encouraged to approach the consumer through every channel available: Get them online and through their mobile devices plus traditional print, TV, radio and, oh yes, the physical store itself.

But the trick is to make it all feel like a seamless approach that represents a single branded initiative. And that makes it all a marketing challenge: not only knowing who your customers are and how they shop, but also how they live the rest of their lives, where they get their information and influences, when they shop, what they buy when they shop (and why) and what they don’t buy (and why).

And, as important, what their values are – and how you can become a part of their life.

9) TAKE YOUR APP AND GET OUT!

Another byproduct of the technical age: consumers who come into your store to accumulate merchandise information, store it on their iPhones and then go order it online.

It’s called “showrooming.” Is it a problem for retailers? And how should you deal with it?

One retailer announced it would charge shoppers $5 for “just looking,” deducting the charge if a purchase was made there. Others have said they’ll throw shoppers who are on their iPhones out of the store.

Hmmm, probably not the best approaches. They’re in your store after all. Make it a satisfying experience. And, in fact, enhance your WiFi offering so people stay in your store longer.

10) DO NOT OPEN UNTIL THANKSGIVING

Macy’s broke the magic barrier this year by announcing it would open at 8 p.m. on Thanksgiving evening. JCPenney followed suit a few days later. Why this unprecedented invasion on family time and football games?

Because Thanksgiving 2013 is falling on the last possible date it can fall on, November 28. That means less than four shopping weeks till Christmas – and only four weekends.

Worse yet, the Jewish holiday of Hanukkah begins the day before Thanksgiving this year, so it won’t even be part of the holiday shopping spree.

After several years of very uninspiring holiday business and the increasing inroads made by the Internet, retailers are going to do whatever they can to save Christmas this year.