The Good News and The Bad News…From Bentonville

It’s the holiday selling season and there’s a lot of news in retail, especially from the center of the retail world in Arkansas. While there are many other stores to talk about, let’s take a look at two stories worth considering.

First the good news. Thanksgiving has come and gone and by now the 40 pounds of newsprint that landed in my driveway has made its way to the recycle bin. Of all the ads and inserts in my paper, I couldn’t help but read one from cover to cover. It had the best photography, the right gift items, and probably the best prices. No it wasn’t Target (as good as their ads always are). Penney’s spent a lot, but looked like everyone else. Nordstrom, Macy’s and Dillards looked like—well, like department stores. The best of the batch, in my opinion, was a slick-looking 16-page standard insert from none other than Sam’s Club. Great photography, heavy, quality stock, terrific items, subtle prices with not so subtle savings. Made me want to read every bit of copy and check every price. While you could argue was this vehicle incongruous with a warehouse club store, you couldn’t argue with the creativity and the savings. Of course, Costco, as always, didn’t run any advertising, but Sam’s set the pace with this circular and I suspect resulted in far better performance than their parent discount chain.

Which brings me to the bad news (unless you’re Target or Kmart). First, as a consumer, I didn’t feel the presence of Wal-Mart at all during the Thanksgiving week. I saw more of the spots from the union trying to break down the conditions of working for the world’s largest retailer than I did from the store. Usually, a dominant player, I didn’t even see a Wal-Mart preprint and the television was transparent. Maybe the new marketing gurus from Chrysler and Frito-Lay had them running ads in Real Simple or Field and Stream magazinea. The lack of any presence by the largest retailer makes you wonder what’s happening in Bentonville. Obviously, from the sales results, consumers felt the same way.

To me it’s another example of this store trying to act like a packaged goods or automotive marketer and forgetting the sense of urgency that retail demands. The fact that they took their eye off the ball to conduct an 8-month agency review (who needed that anyway??), then selected one that really has no retail experience, then fired the key marketing exec from Chrysler and her assistant and then unbelievably started the agency review all over again. Something stinks here. Now they are going to waste another 8 months and countless marketing energy by renewing the search (oh, to be an agency search consultant!) I went into a Wal-Mart this weekend and I think they were as well merchandised as ever. The big difference was that there were no lines at the registers and that really worries me. How blind can they be to their problems? The great brand is in jeopardy.

We will have to see how the Holidays finish for sales, but I hope the news at your company and home is all good . Happy Holidays…

Those who have been reading these articles for the past 14 months know that I have been anything but sympathetic to the trials and downward trends in the department store category. As we get ready for another Holiday Selling Season where Wal-Mart has already taken off the price gloves, (why do they have to make those announcements to tip off the competition anyway?) it’s obvious that branding will once again take a back seat to promotion. Of course, this will show that these retailers really mean business to get their sales trends back on track. On the other hand, recent monthly sales reports once again show that one chain, JC Penney with an 8.1% comp increase, continues its remarkable recovery as the pacesetter in this category.

Recently, I was fortunate to be with fellow RAMA board member and JCP CMO, Mike Boylson at a seminar in Columbus. While there, Mike described Penney’s strategy and efforts in righting that ship and increasing its stock price by some ten times over the past five years or so. Now, I have not been a big fan of the Penney organization since it dismantled my long-term employer, Eckerd Drugs, and basically made one of the strongest brands disintegrate before our eyes in order to fuel the department store’s recovery. However, you have to hand it to the company and Mike’s marketing efforts in making the stores not only exciting to shop, but also one of the most creative branding voices in the marketplace. Penney’s advertising efforts have been consistently on target and freshly creative, but more importantly, the store has moved into marketing venues to elevate a strong brand (with the mature customers anyway) into a higher state of excitement.

Its pop-up store in Times Square was exciting and a great vehicle to say that this is not your father’s Oldsmobile anymore. It’s tie in with MTV with the VMA’s, its JAM after school promotion, and its ongoing sponsorship of high profile media events like the Academy Awards continue to build it’s brand. The strong commitment to its own brands, like Arizona Jeans Company, show a packaged good mentality works or as Doner CEO Alan Kalter says “Think like a brand, act like a store.” Penney’s new agreement with Sephora is going to separate them from all the other stores who sell cosmetics and fragrance. Facing stiff competition from Kohl’s and other specialty retailers, Penney’s is now looking at free-standing sites which, in my opinion, will generate more traffic and a lot of customers who don’t think the malls offer anything exciting.

But it’s not an easy journey. As Mike told me, the brand has a long way to go before it wins over the Gen X and Gen Y customers without losing its mature customers who still believe in the quality of the JC Penney experience. What impressed me is that Mike and JCP know that building and re-building the brand that James Cash Penney started over a hundred years ago is an ongoing and long-term commitment that must touch all areas of the store and its communications. Compare this to Sears who can’t quite figure out if it should sell washing machines or washed jeans. Or Dillard’s whose advertising looks like it’s right out Vogue magazine (a 1965 issue, that is). Penney’s realizes that it must get its brand positioned in vehicles and media in an innovative, unique way. The customers don’t want more of the same and they won’t reject the stores that don’t change. In fact, they simply won’t even consider them. Penney’s may not have won over everyone yet, but you got to give them credit for making the brand more relevant and positioning it to warrant more of the customer’s cash.

“The friendly smile, the word of greeting, are certainly something fleeting and seemingly insubstantial. You can’t take them with you. But they work for good beyond your power to measure their influence.” — James Cash Penney

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It’s been interesting seeing the nationalization of Macy’s taking place on televisions and in newspapers in almost every major market in the country the past couple weeks. Saying good-bye to venerable names like Marshall Field’s, Hecht Co., Burdines, Foley’s and others, Macy’s has launched a well produced national campaign built around one of my favorite Motown songs– Martha Reeve’s and The Vadelas’ “Dancin in the Streets”. In many of the cities mentioned in the song, Macy’s banner now hangs high in shopping center after shopping center. The new campaign extols that the excitement of Herald Square is now being generated in market after market. Or is it?

Federated CEO Terry Lundgren is confident that the consolidation of the stores under the famous Macy’s logo will bring positive sales trends to the chain of stores that have been floundering the past several years. Maybe, Mr. Lundgren should listen more closely to his new theme song. Yes, the customers are not only dancing in the streets, but they are also spending more of their time shopping there as well. Part of the problem with today’s department stores is that they are still anchored in regional malls where today’s customers no longer dance around every week, much less shop. The customers are now excited about the new downtowns and neighborhoods where stores are cropping up more regularly and where customers love the convenience (and the ambience) of being able to park and shop right in front of the store. It holds true for the “Power Centers” which are being built all around town, including many on the same sites where defunct regional shopping malls were recently razed. The excitement of Macy’s flagship on Herald Square just doesn’t exist in the next great Town Center mall and the customers know it. They also know that the stores there haven’t branded themselves to their customers by providing an exciting—OK, at the very least, pleasurable —shopping experience.

What’s more they aren’t addressing the stiff competition from the Targets, Kohl’s, and others who are not only offering as much fashion but also doing it more conveniently and at a better price. Last week in a presentation to retail marketing executives, Michael Francis, Target’s CMO, said that their store’s biggest share of market gains are coming from the department stores. Wal-Mart has been taking share for years with price and selection. Target now takes it with fashion and the excitement that department stores were known for when they identified closely with the communities in which they were located.

The new “Streets” campaign is well executed, the message is clear, and the media weight will bring higher awareness for the Macy’s name—as if they needed it. However, it does not give me—a veteran of 8 years in the department store business—or any other customers a reason to shop a store that they haven’t visited in months. They have not given a reason to abandon Kohl’s, Crate & Barrel, or Men’s Warehouse and come back to the mall
So, Macy’s is everywhere. Now why should we shop there??

I finished one of the most interesting assignments of my career a couple weeks ago. Working with Levitz Furniture on Long Island for the past five months gave me an opportunity to live in Manhattan. This was something I wanted to do when I finished graduate school many years ago, but Uncle Sam had other ideas for me. Having traveled regularly to the Big Apple, I always appreciated how the city somehow works against all odds.

I think the late Charles Kuralt said it best in his “13 Favorite Places In The World”`segment that he produced prior to his death. One of the places that he discussed and featured was the town that he called home for most of his life—New York City. Kuralt said that the reason New York City works so well is that it is a large city made up of a thousand small neighborhoods. Each one of those neighborhoods was its own small town and each one had its own character. And so it was for me when I settled in to my small studio apartment on West 34th Street not far from Penn Station. I soon began to appreciate my neighborhood.

First, there was Ruppert, the evening doorman at my place, who always greeted me with a smile and an “Alright!” before a commentary on the day’s weather report. Next door the dry cleaner and laundry run by a Korean woman who would not only get your laundry back the same day but also have it at the apartment lobby for those of us who usually got back long after they closed at 7pm. Down the street, the Food Fair deli and market was a frequent stop when there was no dinner on the town and their fresh wraps were as good as any food I had at the Bryant Park Grill – the smiles on the two Middle Eastern owners was worth the visit. A little further, Shutters Bar and Café was a good place to stop on a cold or rainy night where John would serve up some of the best meat loaf (and I love meat loaf!) I’ve ever had along with some great Montepulciano d’Abruzzo wine, and jazz from Thursday thru Sunday. Across the way, the Wine Shop was open it seemed at all hours with a great selection and great prices for a 500 square foot establishment. Further down, the Skylight Diner lived up to it reputation as New York’s best diner (according to the Daily News) with wonderful breakfasts and a lot more. Of course, B&H Photo and Video on the corner was an experience showing that you could sell millions of dollars of electronics and photo gear and still stay closed for the Sabbath and every other Jewish Orthodox holidays. I could go on with a lot more and never have wandered more than a block from my front door (see the view above.).

Of course, there was the exception to a good branding retailer with the Kmart Penn Station. This Kmart does more business than any other Kmart in the country despite some of the surliest employees and a chronically broken escalator between the second and third floors. Sometimes location is everything.

What all the other places had in common was that–to the surrounding community–they were famous for something and had people working there who were more neighbors than just sales people. Isn’t that what retail branding is all about? As I travel around the city, I still wonder at the number of stores that do business in neighborhood after neighborhood. No shortage of competition here. But to their market (which may only be one square block) they are the best brand in their category. Duane Reade Drug Stores learned that when they realized that sometimes their market is only the building in which they are located and they serve it well while struggling with suburban locations. It’s all about finding your niche and getting the right people to live up to it everyday.

Now, back to Florida.

I’ve been to the circus a few times over the past 4-5 years and I hadn’t heard those words to start of the show. The reason, of course, was that I had been to Cirque de Soleil and hadn’t given a thought to going to the “Greatest Show On Earth”. Yes, every year I would see the news reports when the circus came to town or left its home in Sarasota to go on the road once again. But I wasn’t the least bit motivated to go and see a three-ring circus filled with clowns, elephants, and trapeze artists all at the same time.

Until I read an article recently in USA Today. The story revealed how this year’s edition of the Ringling Bros . and Barnum & Bailey Circus had been re-imagined. In order to appeal to today’s young families who are living in three ring lifestyles with video games, computer-generated thrill shows, theme parks with high tech rides, and pocket games that they can play everywhere and everyway they want, the circus had to change. With hip-hop music, one big ring with exotic acts, and even its first female ringmaster, the circus has changed. Apparently it is paying off, according to Nicole Feld, the show’s co-producer and member of the Feld Family that revitalized the circus over 30 years ago when they bought it. As he says, they are constantly changing to appeal to today’s kids and in turn, make their parents hero’s for taking them to the circus just like our parents did over the years.

Amazing that more stores don’t get the same spirit of change to constantly appeal to their customers. Sure, Abercrombie, Coach, Banana Republic and others have re-invented themselves in the past successfully and they know that it’s an ongoing process. As more department stores become Macy’s, I ask what have they done to change for their customers? The malls and the stores anchoring them are much like the 3-ring circus—a lot of stuff going on but not many people paying attention or excited by them. Target has added excitement to the discount world, Costco has made food and warehouse shopping an experience. Publix and Wegmann’s have made grocery shopping an experience instead of a chore. The customers are changing faster than most retailers can change the theme lines of their latest commercials. I’ve been working in the furniture industry the past several weeks and am amazed how this industry has stayed the same in terms of shopping experience for the past several decades. Only IKEA and Rooms to Go seem to have noticed that the customer has changed.

The brand is built upon change…changing to build a better relationship with the customers, and like the circus the acts (the people putting on the show) have to change. Out with lion tamers and in with Chinese acrobats who do things we can’t even imagine. Out with old salesman and in with consultants who really understand the customer and what they really want.

So….on with the show!

If you are going to write something about retail marketing you can’t help but discuss Wal-Mart . So the recent announcement that Mr. Smiley Face– who starred in Wal-Mart price reduction campaign for so many years– was being put out to pasture is more than just a simple decision to change ad themes.

One of Wal-Mart’s strengths (and there are many) has long been their market-leading perception as the lowest -priced retailer. You name the category, ask a customer and Wal-Mart always comes out first as the store with the lowest prices. That said, and price always being the first criteria for making a store selection, this was certainly one of the reasons for the chain’s growth to becoming the largest company in the world. I’ve always maintained that a good price perception merely gets you on the competitive playing field in retail, but Wal-Mart parlayed their price perception in becoming king of the hill on that playing field. However, it wasn’t just the low prices that has made Wal-Mart the favorite of more consumers than any other store. Their ongoing campaign with real people—customers and associates talking positively (and believably) while building the trust and respect through their many good works with Children’s Miracle Network, Buddy Walks, etc. – was more than just low prices always. It was genius in building customer trust and loyalty while driving prices lower for all consumers. Of course, this was to the dismay of many small retailers and suppliers who couldn’t compete. But it was and is their strength far and above the low prices that old smiley kept promoting.

So sales aren’t growing at the double digit rates of the past, now everyone falls in love with Target (even though they do 20% of Wal-Mart’s volume), and the company decides that the marketing that put them way out in front must change and bring in the competitor’s thinking (Target), packaged goods marketing strategy(FritoLay) and automotive insights(Chrysler). They fire the agencies that worked so hard to bring the success. Now, let’s copy the competitors in getting celebrities who nobody believes shop at the store. And while we’re at it, let’s ex-communicate old smiley face.

It may work. But if all you do is copy the competition and resort to all the great marketing techniques that have made US automotive retailing lag behind the other countries,is that forward thinking? If you forget the key strengths that makes your check outs far more populated than the darlings of the retail press, is that being a leader? I’m not sure there will be any smiley faces in the boardroom in Bentonville or in the portfolios of investors.

What do you think?

Ken