BEYOND DOT.COM

Here's a howdy-do: On February 25, 2000, the following two news stories appeared simultaneously in national news reports: “J.C. Penney to close 45 department stores” and “Gap to open 660 stores.”

This pretty state of affairs was amplified in three other headlines: “J.C. Penney posts $12 million loss in fourth quarter,” “Gap profits soar 31.9 percent in fourth quarter,” and “Gap's Mickey Drexler earns $7.8 million in 1999.” (That's probably what Bill Gates earned before breakfast. It's an unfair world.)

And on the same day, Jeanne Jackson, president of Banana Republic, announced her departure from Gap Inc. to become ceo of Walmart.com.

So here we are — same day, same economy, same business — and two major retailers are declaring Triumph and Disaster (depending on which story catches your eye).

Don't let all the dot.coms closing down fool you into thinking that dot.com isn't going to work. It is going to work, as soon as the technicians get together with the merchants (Wal-Mart and Jeanne Jackson, for example).

The greatness of a store often (I almost said “always”) depends on the presence of one clear, articulate, motivating ceo (such as Mickey Drexler at The Gap) who is, above all things, a merchant. This makes it hard for other geniuses to share the stage. (Is that why Jeanne Jackson left The Gap?) But The Gap's loss will almost certainly be Wal-Mart's gain. What Walmart.com needed was a merchant ceo, so this is a perfect fit!

Does Penney's have a visionary ceo? Does anyone know who J.C. Penney's ceo is? Do the recently dismissed Penney's workers have the vision as clearly as do new hires at Gap? Banana? Old Navy? Tiffany? Wal-Mart?

Even a giant company needs a tangible ceo: Gates, Buffett, Kelleher, Welch, Eisner, Drexler, yes, even Martha Stewart. (Only Wal-Mart seems to have created enough visionary infrastructure to lead us to believe that Sam is still leading the company. That's long-reaching clarity for you.) I'm not referring to the paid-for publicity that allows department store ceo's to congratulate one another at New York banquets. I mean the kinds of leaders known outside their industries by people who like and admire them, work for them and buy stock in their companies.

Penney's is selling 289 Eckerd Drugstores that it purchased during the era of some other mission statement. How sad to fabricate stability by selling off parts of yourself — and your staff and salespeople, too.

Eaton's of Canada was great under founder Timothy Eaton. But after 100 years, an unfocused bunch of Timothy Eaton's descendants (not merchants) bankrupted and closed the company. Nordstrom started out with vision that communicated itself all the way to its customers. Now it is declining, led by the astonishing spectacle of five Nordstrom brothers (office of the co-presidents!). Five visionaries won't work, either. Imagine GE run by five little Jack Welches issuing five sets of directions.

Praise be to individuals like Marvin Traub (Bloomingdale's then, not now) who, when he ran the store, Ran The Store. And everyone knew what to do, including the public.

Now Wal-Mart reaches out of Bentonville, Ark., to plant a swift new e-commerce headquarters in Silicon Valley, Calif. (The mountain comes to Mohammed?) They hire an e-commerce and merchandising superstar to head it up. And just as they do this, Target announces that its selling cost is now as low as Wal-Mart's. Target is such a hit that the name of the parent company, Dayton-Hudson Corp., has been changed to Target.

Meanwhile, there's more merchant news from Target. After hiring Michael Graves and Philippe Starck to design exclusive merchandise for them, they now are guaranteeing Mossimo Giannulli $1 billion in apparel sales. A stunning contract specifically bars him from working for Wal-Mart, Kmart, Penney's, Sears, Kohl's, Dollar General, Pic 'N Save, Hill's, Bradlees and Ames.

But what prevails is this: The best retail businesses — bricks, clicks and others — are run by merchants. The public wants great stuff. Empires rise and fall on the answers to the perpetual customer demand: “What's new?” Tiffany's tells us what's new: They recently announced Lucida, the first new diamond cut in 114 years!

When stores are run by others — that is, anyone to whom there is a more important subject than “what's new?” — they often fail. Not from lack of trying, of experience or of management ability, but from missing the critical element of merchant mind. All of the greats — Sam Walton, Marvin Traub, Gordon Segal, Mickey Drexler (with Jenny Ming [Old Navy] and Jeanne Jackson [Banana — oops!]) — all started, thrived and each in his own way created new markets and new marketing.

E-commerce would have you believe that the merchandise doesn't matter; that it's all in the distribution business. That's changing fast. Merchants are moving onto the Internet. The news that Jeanne Jackson moved from The Gap to the Internet is less important than the realization that Wal-Mart hired a merchant to run its Internet business. A merchant at the helm is still the competitive difference between one web site and another — good merchants and bad, those who get it and those who don't (and the “it” here is merchandise, first, last and always, now and forever).

Even with the slickest selling machine in the world, bad merchandise won't sell. Buyers have changed into expert numbers people, but you cannot keep the thrill out of the eye of a buyer finding something new. They salivate. They get excited. They feel the goods. They want it first. They want to make money on it. They want to tell the world. They get carried away so that you will, later. If they could, they would lurk, invisible, behind every pillar waiting for a customer to vote “yes” with money. They need to feel vindicated, loved, approved of. Praise be to buyers.

Marvin Traub sent 100 buyers to Japan with $22 million to spend. They had 18 months to find new merchandise or to have it made according to their specifications. They brought back Japanese housewares, games, kimonos, art, fabrics, high-tech novelties, dancers, painters, calligraphers… The entire store was loaded with merchandise customers had never seen before — they bought all of it, and they loved Bloomingdale's.

Now the buyers dwell in an overcrowded hive of temperature- controlled computers. They still occasionally get out to go to Rome to check out the shops, but that is rarer and rarer, since everything can now be done without ever turning the blue screen of f. So there is less and less chance of the serendipitous side-trip that could lead to originality, novelty and huge consumer thrills.

Or else the merchandise manager is buried in the Dallas Apparel Mart, where vendors come to him in a ceaseless parade of rolling racks with samples sagging on hangers. This cannot compare with the far more exciting (but rare) trip to a chilly knitting mill in dreary outer Scotland, where something about the trip and the trouble and the bone-chilling temperature all collide in the idea of making fisherman-knit bedspreads. Today's merchant today won't have had the benefit of taking five smart people on a five-day brainstorming trip through California in order to experience and then bring back “California style” to stores across Canada in February, calling it “Uncrate the Sun.”

Gordon Segal created Crate & Barrel based on the merchandise discoveries he and his wife made in Scandinavia, down to the use of crates and barrels to display the stuff. It was the discovery of their personal merchandise excitement that propelled Crate & Barrel into the brand-new world of inexpensive home style.

Leslie Wexner, founder of Limited Inc., was asked how he'd like to be remembered. He said, “As a great sweater buyer!”

In retail's greatest current phenomenon, Amazon.com, Jeff Bezos doesn't think of himself as a merchant king. He is the king of distribution. The distribution genius practically invented e-commerce, taking everyone by surprise, without (shudder) any retail experience. His mission: to sell everything to everyone. It's almost as if the merchandise doesn't matter. Amazon.com has yet to make money, but it certainly has the retail spotlight. However, watch what happens now that retail has caught its breath. Watch how a merchant like Wal-Mart competes head-on with Amazon.

There is a long history of “first” not being “best.” Wal-Mart didn't invent the discount store, but it mastered it. McDonald's didn't invent fast food. Dell didn't invent computers. Wal-Mart was certainly slow to go on-line (and what a revolution it is for them to have an office not in Bentonville, Ark. A merchant is running the “store” in Silicon Valley). Some say Amazon won't make it. Certainly, many dot.coms who know “e” — but not retail — will disappear, buried by the next merchant who masters the computer.

The more things change, the more they stay the same. The ultimate successes and failures in retail have always been inspired by merchants. All the rules change, and we are all refreshed. I'm betting that great merchants will go on leading great stores, just as they always have.

Peter's current projects include presentations to Wild Birds Unlimited in Albuquerque, and Canterbury Stores in Christchurch, New Zealand. A videotape of Peter's keynote address to RAC 2000, entitled “It's About Time!”, can be ordered from RAMA (Retail Advertising & Marketing Association). Phone 312-251-7262; fax 312-251-7269; or visit them at www.ramarac.org.