Retailers on Retailing

Retail CEOs agree that sameness is the bane of their existence, reinvention is an ongoing initiative and innovation is tantamount to success. Those were just a handful of key takeaways from the NRF & Oracle Retail Innovation and Leadership Roundtable held late last year in New York City. The event brought together a small group of retail CEOs and industry thought leaders to discuss the current state of retail. The dialog addressed topics ranging from industry challenges and trends to how internal and external factors affect the financial performance of retailers.

Walter Loeb, president of Loeb & Associates, opened the discussion with this industry imperative: “Every retailer must innovate every day because if they don’t, they will die on the vine.” Loeb pointed out that innovation takes many forms, from unique store experiences to groundbreaking uses of technology and fast fashion.

“Among the most creative are companies like Apple Store or Uniqlo,” he said. “In other instances we’ve seen that by expanding technology … companies have been able to drive change. There is more immediacy to new ideas and how they’re translated to stores. Every retailer who innovates creates excitement for everyone involved — from the store associates to the customers.”

Duncan Angove, general manager and senior vice president of Oracle Retail, offered a pragmatic view. “If you look at the role of technology, sometimes it is a catalyst to innovation and sometimes it is an enabler. Localization is an example; technology can help to balance cost and complexity.”

Angove believes that the next wave of process innovation and technology will be led by analytics. “The real key,” he said, “is to start to connect today’s centralized merchant with actionable information about customer preferences by location, and leverage that understanding about customer demand coupled with all the science.

“That’s the big opportunity for the next five years,” he said. “It is the blending of the art of retailing with science. We are really in the foothills in terms of this proposition in retailing today: other industries are further along.”

Following are the highlights of comments from the participating retail CEOs.

Myron Ullman, Chairman and CEO, JCPenney
Planning. It’s a false economy to assume that you have time to focus on short-term performance and ignore the overall agenda of what your sustainable proposition is. You have to have something that resonates with [your customer] — a reason for being her preferred choice.

Innovation. Penney’s thought they were very responsive by being localized and by having every store manager buy the merchandise for their store. But they were terribly risk-averse ... The success of the company has been to say, “The biggest risk you are taking is taking no risk.” Having a centrally driven business model that allows people to take risks, take responsibility, make mistakes — and live through it — encourages innovation.

Fast fashion. We have accelerated purchasing to 30 weeks and are on our way down to 25. The general view is that it is all about cycle time. And I would take an even broader view and say you have to be trend-right first because, no matter how fast you get it, if it’s ugly, it’s still ugly.

Multi-channel. We have a piece of sportswear that we are going to price on the Internet and that price could conceivably change every five minutes. ... In the catalog, it has to last for six months, right? This weekend, we’re going to promote it for Saturday and Sunday. That’s the same piece of merchandise, three different prices, three different intervals, three different media types ... The challenge is not to lose the customer in our internal plumbing problems. We have to manage one down, manage one up and at the same time run the stores as if they were totally transparent to everything else.

Bill McComb, CEO, Liz Claiborne
Innovation. You have to have a balanced portfolio. There’s incremental innovation, and then there’s transformational innovation. You don’t tackle transformational innovation without concurrently mining your business every day. Investors understand that and price out a company’s willingness and ability to innovate.

Research. We’re in the business of creating desire: You don’t just look at research and build around what [it is] telling you — that is playing to the rearview mirror. You listen with one ear and you use research, then you take that creative energy and channel it to fully exploit the brand opportunities.

40-something shoppers. The world is beginning to wake up to the fact that there are plenty of Demi Moores out there — women in their mid-40s who want to look and feel like they did in their 30s. There aren’t big brands that have captured that, stood for it and delivered it in terms of price value, fit, quality and ongoing styling ... We are in the final stages of finalizing a very different merchandising and product positioning for the Liz Claiborne brand.

Seasonal shifts. There is an opportunity for the industry to reconfigure and rewire the way that we are shipping product in terms of timing ... I think that the data is in [and it shows] that consumers aren’t wardrobing themselves the way they used to. There are very few who make a big August buy for the season; most are buying for now.

Jane Elfers, CEO, Lord & Taylor
Private vs. public. In 2000, when we started the repositioning of Lord & Taylor, we were in a very dire place: it was either innovate or we weren’t going to be around. When you look at the progress from that point to when we sold the company in 2006, there was a lot that got done. [Since becoming private] it has only been positive and it has dramatically enabled us to speed up the pace of change.

Customer segmentation. We needed to be more relevant to a new generation of shoppers. In 2002 we separated all our merchandise into three categories — contemporary, modern and updated classics. Contemporary is really an attitude and a fit issue: There’s really only a certain universe of customers that can wear contemporary, and you’ve got to make sure you don’t overdo it. In modern — the sweet spot for now and the next 15 years — it’s really about contemporary styling but at more of a missy fit. That’s the area that the vendor community was not attacking. Today, 25 percent of our business comes out of modern.

Key “modern” vendors. Michael Kors has been one of the strongest vendors for us in this space, and our own proprietary brand, Context, was developed to fill this void. We also reached out to Brian Bradley and asked him to develop product for us. Cynthia Steffe is coming on board in January to help us design a proprietary brand; it’s another very important part of our strategy ... We really believe in the modern woman, and we don’t put an age to it: We think of it as a lifestyle, and we think that is where our business is going to be for a long time.

Stephen Sadove, Chairman and CEO, Saks
Innovation. I don’t think that public vs. private should determine whether you drive innovation. You can innovate in a public environment; you can innovate in a private environment. It’s a question of how do you create a culture and an environment where innovation can thrive.

Customer relationships. [In] a business like Saks, which is very high-touch, very associate-relationship driven, you learn as much from the associates and what they are hearing from customers and feedback they are getting as you do from formal market research.

Multi-channel challenges. You get into questions of who gets credit for the sale and you have issues of how you manage the inventory. All of those are tensions that you have to work through; they represent an enormous opportunity if you look at it from the eyes of the customer. The customer wants a seamless transaction; the customer wants the product when they want it, where they want it. It’s up to us to solve those behind-the-scenes situations so the customer gets the kind of experience they expect.

Performance of luxury goods. Luxury in the aggregate is performing very well. I think you are seeing more of an economic hit at the lower end of luxury than you are at the higher end of luxury. Going forward, you’re going to continue to see a healthy luxury marketplace, and don’t forget that it’s a global market.

David Jaffe, CEO, Dress Barn
Research. One of the things that we do, at a very practical level, is have “What Can We Do Better” meetings with all the departments that I chair. Rather than taking a strictly top-down approach with just a few people making decisions, we talk to everyone — including sales associates and customers — and we say, “We need to re-engineer our business because it is not working as well as it should.” It has turned out to be very successful and has helped us to reinvigorate our business.

Connecting with shoppers. We call it an emotional relationship. We want to build the loyalty, not through having lowest price or even the most fashionable merchandise, but by making the whole process of shopping special for her.

Building customer relationships. We make sure the stores have all of the tools that they need so that they can provide the service level we are looking for ... If we can continue the customer dialog — whether it is indirect through a mailing or through e-mail, or direct when they are coming in and shopping with us — I think we can build that relationship on a store-by-store basis.