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Barbara Farfan

Barbara's Retail Industry Blog

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U.S. Retail Industry Has Reasons to Celebrate in May - Retail Firsts and Retail Births in Largest U.S. Retail Chains Shaped U.S. Retail History (NKE)

Saturday May 31, 2014

The month of May gives the U.S. retail industry plenty of reasons to celebrate, as notable May first and births helped to shape U.S. retail history in significant ways. The first membership retail store in the U.S. - E.J. Korvette - opened on May 26, 1948. The world's first Apple retail store opened on May 19, 2001. And the world's largest convenience store, Buc-ee's, was opened in New Braunfels, Texas on May 7, 2012.

A few more of the largest U.S. retail chains got their start in May because that's the month their founders were born. Burger King's co-founder James McLamore, and Bob Evans Restaurants' namesake founder Bob Evans were both born in May. And even though it didn't start out as a retailing company, the retail industry today can also celebrate the May birthday of Nike's co-founder Bill Bowerman, as well as the anniversary of the renaming of BRS Inc. to Nike, Inc. on May 30, 1978.

Even though Nike still markets its products mainly through other people's retail operations, its presence in the retail industry is not insignificant, and its way of doing business is not unnoticed.

Nike announced this month that it is banding together with some of the largest U.S. retail chains like Target, Gap, Walgreens, and Lowes to share intelligence information in an effort to stop cyber crime. After the Target Black Friday security breach disaster, it's obvious why that company would want to do anything and everything to prevent cyber crime. But there have been no massive security breach incidents reported by Nike retail stores, so the Nike leaders are apparently taking proactive steps to protect its retail and online customers.

This is in alignment with Nike's consistently high ranking on the annual Best Retail Corporate Citizens list. In 2014, the employee relations, environmental impact, human rights, philanthropy, and governance of Nike helped the company to secure a #19 ranking, compared with the top 100 companies from all industries that are considered to be the best corporate citizens in the U.S.

This high ranking also seems to be in alignment with co-founder Bowerman, who, in his 24 years as a track and field coach, won four NCAA track and field championships while coaching 19 Olympic athletes and 44 all-American track stars. Bowerman is a man who had obvious and enviable success in both sports and business and the philosophy that drove that success can be found in some of the most classic Bill Bowerman quotable quotes.

Happy Birthday to Bill, to the Nike name, and to all the beginnings that helped made the U.S. retail industry what it is today.

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Anthropologie Store Delivers What Global Shoppers Prefer - Personal Touch in Customer Experiences Beats Retail Technology in Worldwide Survey (URBN)

Saturday May 31, 2014

Retail shoppers around the world want to be inspired more and analyzed less. That's according to a global survey of 10,000 consumers in 11 different countries that was conducted by McCann Truth Central's consumer intelligence unit. Nearly two-thirds the global survey respondents said that they want inspiration while they are shopping. Additionally, 52% of the shoppers surveyed said that "personal" shopping is different than a "personalized" experience that is driven by retail technology and mathematical categorization.

In other words, shoppers want genuine personal connection. They don't want artificial algorithmic big data personalization. Good research. Good insights. Good news for those retailers who don't confusingly think that retail technology and customer experience are the same thing.

The newness of retail technology used in physical or online retailing seems to be "inspiring," for a while, but once the newness wears off, shoppers will still want to be inspired, and they'll be looking to the merchandise, merchandising, and the personal touch for more substantial, more authentic, and more memorable inspiration.

I experienced a great example of this recently when I visited an Anthropologie (URBN) store in Texas. Is there a retail chain in the U.S. that has more inspiring front window displays than Anthropologie? I watched the emotive visual appeal of this Anthropologie store's front window literally stop shoppers in their tracks. The way that passersby admired, discussed, and photographed this particular Anthropologie window display that was designed for no particular holiday or occasion was the same way that people admire, discuss and photograph compelling art pieces in a museum. Good start.

A large percentage of those who stopped to look at the Anthropologie window display walked inside the store, which is the best result that a front window display could get. Once inside, it's unlikely that shoppers are disappointed by Anthropologie's in-store visual merchandising, which is romantic, artistic, and inspiring throughout. Once again it was the combination of the emotive visual appeal and the eclectic color-coordinated merchandise mix of clothing, accessories, and housewares that engaged shoppers and inspired them to wander through the store slowly and deliberately, not wanting to miss anything. Good design.

Shoppers like what they see at Anthropologie. But where I personally thought Anthropologie took their customer experience to the leading edge wasn't found on the sales floor, but rather in the fitting rooms. Like any fitting room area in any physical store location of the largest U.S. retail chains, the Anthropologie fitting room had the basics - small rooms behind locked doors guarded by a fitting room attendant. But unlike any fitting room that you're likely to see in any other retail chain, this Antrhopologie fitting room area was stunningly decorated and extravagantly spacious. More than one shopper besides me uttered an involuntary "Wow!" when they stepped through the door.

anthropologie personal touch customer experience beats retail technologyWhat made the Anthropologie fitting room experience truly unique, though, had nothing to do with the decorations. When the Anthropologie fitting room attendant escorted me to my dressing room stall, instead of asking me how many items I had, she asked me my name. I told her. She introduced herself, and told me to let her know how she could help. That's not so special, except...

While I was taking clothes on and off, I heard the same fitting room attendant ask the name of every single person she opened a dressing room door for. I found myself wondering why she bothered to do that because surely she couldn't remember the hundreds of names that she collected in a single shift. But sure enough, she did use some of the shoppers names as she was conversing about sizes, colors, and different outfit combinations. The personal conversations that were happening in that fitting room area were truly impressive, especially since she was remembering so many names and I had forgotten hers immediately.

When I was leaving, I decided to snap some photos to remind me of the gorgeous Anthropologie fitting room area. That's when I spotted the attendant's secret weapon. There was a small mirror on the front of each fitting room door and as each shopper gave their name, the attendant wrote it with a dry erase marker on the top of the mirror. It was a personal touch strategy with the practical tools necessary to use it with every customer every time. Good execution!

Without a single high-tech retail gadget that I could see, Antrhopologie successfully integrated the two aspects of a shopping experience that the Truth Central survey respondents said they preferred - inspiration and personal touch. And by focusing on creating a signature low-tech, high touch shopping experience, Antropologie managed to generate a year-over-year net sales increase of 8% in its latest fiscal quarter.

A customer experience can include technology, but technology alone can rarely replace a carefully crafted and consistently managed customer experience - no matter how convenient it seems that could be.

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How Toyota Delivers on the Promise of Its Most Valuable Auto Brand in the World - 2014 Retail Brand Rankings (TM)

Saturday May 31, 2014

When the 2014 Most Valuable Brands list was released earlier this month, the auto retailer that was valued the highest was Toyota (TM). According to market research organization Millward Brown, the Toyota brand is worth $29 billion, which is $4 billion more than the next most valuable auto brand, which is BMW, according to the annual BrandZ Top 100 methodoloby. Mercedes is the only other auto company to have a brand value high enough to be ranked among the top 50 brands in the world, with an estimated brand value of $21 billion.

Let's face it - brand value is nothing more than a fabricated calculation which really means nothing except to those who pay attention to fabricated calculators and assign meaning based on them. But what DOES matter for the most valuable brands in the world - and for every brand in the world - is how each of them delivers on the promise of their brand with every customer every day. Based on my personal experience, the 26th ranked Toyota brand would rank at or near the top of the list if it was titled the Most Consistently Delivers on the Promise of the Brand list.

What is the promise of the most highly valued car manufacturer and retailer in the world? It can be found in the Toyota mission statement which promises, among other things, "Through our commitment to quality, constant innovation, and respect for the planet, we aim to exceed expectations and be rewarded with a smile." It is the responsibility of Toyota's front line team to deliver on this mission statement promise, and it is the responsibility of Toyota management to identify and eliminate barriers that would make delivering on the promise of the brand difficult or impossible.

One of the reasons why I never dread going into a Toyota dealership for service is because invariably I leave with a customer service story worth writing about. More specifically, invariably I leave with a positive customer service story worth writing about. The "positive" part is important. The "worth writing about" part is extraordinary. There are plenty of businesses that provide service and experiences that are nothing to complain about, but they're also far from being something so notable that it's worth writing about.

So, not too long ago there was Toyota Tony who helped me tweak my non-essential gadgets and demonstrated the Toyota commitment to excellence worth writing about. There was Maintenance-required Martin who fixed my oil warning light problem by finding out that there was no problem, and created Toyota Customer Satisfaction worth writing about.

Recently I had another Toyota service experience worth writing about, which I have been remiss in writing about. It happened when I took my car into a random dealership for its routine maintenance check. The greeting was friendly, the checkin process was efficient, the time quoted to perform the service was reasonable. While the maintenance check was being performed, a member of the maintenance team was kind enough to drive me to a business a couple of miles away so that I could make good use of my waiting time.

When I returned to the dealership, my car maintenance had been completed in less than the time quoted, and while I went to the service counter, my very dirty car was given a much-needed wash. The experience from beginning to end was positive, and I appreciated the professionalism and efficiency of the entire Toyota team. But there was nothing "extra" in this "ordinary," Toyota service experience, so I thought this might be the first time I left a Toyota dealership without experiencing anything "worth writing about."

After I finished paying my bill, the cashier thanked me and then said, "Please take a flower with you," gesturing to a vase full of single-stem flowers that I hadn't even noticed. I must have given her a quizzical look because she said, "No, really. Take a flower." I asked her if it was a special occasion, and she said, "No special occasion. Just special customers."

toyota_most_valuable_auto_brand_delivering_promise_customer_service

Super corny. Super sincere. I picked my flower and walked out of the service department to my waiting shiny and clean, freshly serviced Toyota Prius. And just like the mission statement says, I rewarded Toyota with my smile.

I realize that a single carnation with a handmade thank-you note wouldn't have so easily delighted me if my maintenance issue was big and my service bill even bigger. If I ever find myself in that kind of dramatic service situation, I'll let you know how the Toyota service team delivers on its commitment to excellence promise and if they exceed my expectations. Right at the moment, I can't imagine how they would manage to do that, but since I'm three-for-three in extra-ordinary Toyota experiences so far, I'll be willing to bet it will be something worth writing about.

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Membership Retailing News: Costco Beats Sam's Club, Sears Clarifies Membership Future Vision, E.J. Korvette Celebrates Membership Past

Friday May 30, 2014

Costco reported $473 million in Q3 earnings yesterday, which was $14 million more than its Q3 earning last year. Analysts still found a way to be disappointed, though, because Costco's $1.07 EPS was two pennies lower than the $1.09 analysts had expected. But refreshingly, Costco leaders didn't kowtow to analysts' disappointment and the reason we know that is because Costco leaders didn't waste anybody's time reciting the common list of easy excuses - weather, the economy, Internet competition - that other retailers like Wal-Mart, Kohl's, Home Depot, and Macy's tried to hide behind in their own most recent earnings report.

Costco's membership retailing is going good.  Good results. Good report. Good progress. Good trajectory. Good momentum. Good outlook. Good quarter. We move onto the next.

Costco's earnings report is just the kind of quarterly earnings reports we'd like to get from all of the largest U.S. retail chains. And it's just the kind of reports that Costco is accustomed to giving. Even though Costco wasn't the first warehouse membership-type retailer, currently it is the best and the Costco Craze lives on.

If we took a poll of the more than 72 million Costco members worldwide, it's safe to say that a large percentage of them have no idea which U.S. retail chain was the first membership retailer, and would be surprised to find out that it wasn't Costco by a longshot. In fact, this past week was the anniversary of the U.S. retail chain that is considered to be the first membership retailer in U.S. retail history - E.J. Korvette.

The E.J. Korvette chain began on May 26, 1948 as a suburban post World War II suburban discount department store chain. With a deep discount dollar store type of business model, the stores were conceptualized to have minimal staff, and minimalist in-store fixtures and merchandising. It was the right idea at the right time, except for one thing - that is, the fair trade laws that gave wholesalers the power to set minimum retail prices for their products. Those laws actually made deep discounting an impossibility.

Instead of giving up on his concept, E.J. Korvette's founder Eugene Ferkauf came up with an idea that not only skirted the law that he didn't like, but unwittingly created a model for membership retailing in the U.S. retail industry. Simply, E.J. Korvette handed out free "membership" cards at the front door, and declared itself to be a membership organization instead of a retail store. Since the fair trade laws didn't apply to membership organizations, Ferkauf was able to underprice his competitors.

Using unconventional strategies to create deep discounts and underprice competitors... that sounds suspiciously familiar. It's not a surprise that E.J. Korvette's creative underpricing was an inspiration to Sam Walton. Anecdotally Walton got advice from founder Ferkauf before the first Wal-Mart store was opened. Three years after the E.J. Korvette chain went out of business, Walton's own version of a membership warehouse was born as Sam's Club.

These days Sam's Club can't lay claim to the same kind of success that E.J. Korvette pioneered 66 years ago and Costco reported a day ago. In its most recent quarterly earnings report in May, Sam's Club reported a decrease of 0.5% in year over year Q1 same store sales. Compared to Costco's 72 million members, Sam's has about 47 million.

Sam's Club leaders blamed its disappointing Q1 performance on a decline in public assistance to its customers. Personally I don't understand how or why people on public assistance are shopping at Sam's. When the average food stamp recipient receives about $134 per month, the $45 they would pay for the privilege of buying in large quantities at Sam's Club represents 33% of one month's food stamp budget. Much like Wal-Mart, Sam's Club seems to have a business model that is unsustainable.

The public assistance defense also doesn't seem to match the 2% Cash Rewards program that Sam's Club introduced yesterday either. All Sam's Club Plus members will be automatically eligible to receive 2% cash back on their Sam's Club purchases, which they can use for more purchases, membership fees, or actually get cash out of the Sam's Club cash registers and put it into their pockets.

Of course the Sam's Plus annual membership fees are more than double the regular membership fees. So, that is the equivalent of almost an entire month's worth of food stamps just to join. To recoup the extra membership fees, the average food stamp recipient would have to spend twice as much as they actually receive in their public assistance check. Either the math doesn't work, or else the "public assistance" excuse offered with the Q1 earnings report doesn't work.

As an additional benefit to its dues paying members, Sam's Club added another dimension of membership retailing In February when it launched its "My Subscription" program. Dues-paying Sam's Club members can now enroll in an auto-reordering program which allows them to choose from about 700 different products which will be autoshipped every month free of shipping charges. Amazon.com also has this type of membership retailing subscription program for monthly repeat purchasers, as does Target.com.

One U.S. retailer that is willing to stake its entire retail future on the retail membership/subscription model is Sears. Even as Sears seems to be morphing from traditional department store retailing to retail real estate landlording, its last stake in retailing is completely rooted in its Shop Your Way member-based loyalty program.

There is no longer any question about where Sears sees itself in a new retailing paradigm and and what it's future identity in the U.S. retail industry will be. We see it clearly defined at the beginning of its press releases now... "Sears, a leading integrated retailer focused on making shopping easier for its members." CEO Eddie Lampert describes the future of Sears retailing as "a member-centric business model focused on providing benefits to our members anytime and anyplace."

Though Lampert seems to think the Sears free Shop My Way program is going to revolutionize retailing, it's really pretty similar to the original membership model of E.J. Korvette, with a similar loyalty-building through low pricing intent. Besides disposing of assets and leasing out real estate, the Shop My Way program seems to be the singular focus of Lampert and a dominant part of his future vision for Sears.

Lampert's asset-less membership retailing vision may or may not prove itself to be correct, but at least it's clear. Clarity is something that Sears leaders have been desperately seeking for years. And just when you think Sears leaders have found some clarity, they unfortunately introduce...

The Sears Snap Your Stache promotion, is a Father's Day contest designed to find and reward the "greatest dad mustache." Like many of its Hail Mary marketing schemes, this Sears mustache promotion seems to create more questions than answers.

First of all, wouldn't this be a better Movember promotion? Are hipsters the new target market for the Craftsman, Diehard, and Kenmore brands? Is there anything that can be found on a man's upper lip that is compelling enough to capture the attention of the average female Father's Day gift shopper? Even if any of the stache contest photos happen to go viral, how does Sears intend to translate facial hair attention to Father's Day sales of tools, grills and lawn mowers?

Shave My Way. Shop My Way. Market Any Old Way. One thing Lampert doesn't seem to have complete clarity on yet, that Ferkauf seemed to understand very well, is that even if the cost of a retail membership is free, you still need to match your members to your merchandise. Because no matter how easy you make it to join a retail membership program, it's going to be equally as easy to quit.

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Delta Flight Reveals Unenlightened Customer Experience Reality While Latest Customer Satisfaction Surveys Reveal Data (DAL)

Thursday May 29, 2014

In the month of May, we learned from a wide variety of customer satisfaction research that Alaska Airlines has the best customer experience of the traditional airlines, that customers aren't particularly satisfied with the service provided by any TV or ISP provider, that Amazon is the retail industry's best customer service champion, and that 88% of customers still prefer to use the phone to talk to a live person about customer service issues. There is no dearth of data when it comes to customer satisfaction in the U.S. But that doesn't necessarily mean that there's an abundance of the satisfaction that the surveyers are studying.

"Enlightened Hospitality" was the title of the article I was reading in the inflight magazine while I was waiting for my plane to take off from St. Louis yesterday. It's a good title. It's a great concept. Mostly it's a PR puff piece introducing the partnership between Delta Airlines and Union Square Hospitality. Nonetheless, "Enlightened Hospitality" is something that Delta was laying claim to in that article which is accessible to every passenger needing something to read while approved electronic devices are turned off and stowed.

Here's how Delta CEO Richard Anderson describes the Enlightened Hospitality of Delta Air Lines...

"At Delta we think it's important for customers to feel not just welcome but appreciated and respected. That manifests itself in many ways - from the technology behind the scenes and in customers' hands to great onboard menus...Service and determination are part of our DNA."

Here's how I describe the Enlightened Hospitality I experienced prior to boarding this particular Delta flight....

When I began my checkin process, the friendly and helpful ticket kiosk screen informed me that I no longer had the seat I had chosen when I booked my ticket, and that my seat would be assigned at the gate. The seat map told me there were very few seats available and what was available was rather undesirable. I also didn't receive any kind of boarding pass that would get me through security for my seatless flight. So my less-than-enlightened techno checkin experience led me straight to the long line queuing up to the ticket counter where there were real people I could talk to.

On my way to the front of the line I asked one of the human Delta kiosk overseers what might have happened with my seat assignment. He told me that getting bumped out of the seats that were chosen at booking "happens every day," and verbally gave me a list of several different reasons why. That was definitely an "enlightening" conversation.

Remaining hopeful for some Enlightened Hospitality at the ticket counter, or at least some good service recovery, I finally inched up to the "next in line" position in the slow-moving queue. In the five minutes I spent with a human ticket counter agent, my enlightened hospitality didn't include a greeting, a smile, the use of my name, a suggestion that perhaps something had gone awry with the online booking process, or an apology. In place of those customer service basics, I got an extremely large dose of attitude and sass. My "enlightened" Delta ticket agent was argumentative, told me that I had never chosen seats (which I had), told me I was never assigned seats (which my computer told me I was), and fussed at me for missing the trash can with the old bag tag that I had removed from my luggage because she was too busy to notice while she was copping an attitude with me.

The upshot was that I didn't have the free aisle seat I booked, and if I didn't want one of the few middle seats that were left, then I was going to have to pay extra for a priority seat. Mentally, I added "forced upgrades" to the list of reasons why people get bumped out of their chosen seats that I had been given by the kiosk attendant.

I'm not going to say that I don't have the ability to dish out a fair amount of attitude and sass from the customer side of a dissatisfying service experience. But yesterday was not one of the days I did that. In fact, I started my conversation with the Delta Attitude-and-Sass Agent by saying, "I hope you can help me," which hardly warrants a confrontational response. And, by the way, even if I had been wearing my service failure frustration and disappointment on my sleeve, I still don't think that attitude and sass is an appropriate response from a front line customer service representative.

But that's just me. Obviously I have a different definition of "enlightened."

Back to the Delta in-fight magazine article, CEO Anderson says, "At Delta, our people are the cornerstone of our customer service, and they are what make Delta different. We're all connected through a common set of values, and that really shines through the customer experience."

When the chief executive of Delta - or the top leader of any organization - is willing to put that kind of a statement in writing, I want to believe that they actually believe it is true. Looking at Delta's "common set of values," includes such lofty ideals as bettering the standard of living and becoming a force for Global Good. Nice thoughts, but it's not difficult to understand why those kind of lofty ideals don't translate into consistent customer service behaviors. Hopefully the "common set of values" Anderson refers to is more specifically outlined in some internal documents somewhere. Otherwise, there's no common basis for decision-making and behavior, which could leave room for attitude and sass. Hmm.

I was talking to an HQ manager for Enterprise Rent-A-Car recently and I was complimenting him on how consistently friendly, polite, and professional Enterprise rental agents are at the Enterprise rental car counters. I thought the conversation that followed was very "enlightening"...

Manager: They better be friendly and professional because they have to be.
Me: What does that mean, "they have to be?"
Manager: it's the hallmark of Enterprise and what makes us different, so they have to be that way.
Me: Every manager in every company says that, but that doesn't mean it's true. How do you actually get them to DO it?
Manager: Well, if they don't do it and a customer complains about it, they'll get a personal visit from somebody at district level or higher. It's a career limiting thing.

In other words, it's a non-negotiable. We don't steal from the cash register. We don't work under the influence of alcohol. We don't give attitude and sass to the customer, even if we think they might deserve it. So judging from my Delta ticket checkin experience today, either making customers feel "welcome, appreciated, and respected" is not viewed as a non-negotiable by Delta employees, or else there is one employee at the Delta ticket counter in St. Louis who is actively working to create an excuse to look for a new career. Only Delta knows for sure.

In all fairness I do want to add that once I got past Ms. Attitude and Sass, every other Delta gate agent and flight attendant I encountered was a friendly, respectful, and appreciative Delta team member just like CEO Anderson thinks all Delta team members are and should be. So... doesn't the good customer experience with a dozen Delta employees enroute outweigh the not-so-good customer experience with Delta technology and one employee at checkin?

Logically, it should. But all other things being equal, the cost of the ticket, plus the cost of the checked bag, plus the cost of the seat upgrade, plus the less-than-enlightened checkin process don't add up to an "extremely satisfied" rating on the survey card I was handed as I exited my first flight yesterday. I am not very "likely to recommend," and at the very least this Delta customer experience leaves me with a willingness to shop the competition.

It wasn't a completely loyalty-busting Delta experience, but it certainly wasn't loyalty-building either. And if CEO Anderson believes what he was quoted as saying in his own in-flight magazine, that should mean at least one Delta customer experience was a fail yesterday.

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Q2 Retail Store Closings and Coldwater Creek Bankruptcy Raise Questions About U.S. Retail Executive Leadership Structure and Upper Echelon Change

Tuesday May 27, 2014

Store closing activity in 2014 is shaping up to be a year-round spectator sport, with enough surprise moves mixed in with predictable plays to keep retail industry enthusiasts passing the pecuniary popcorn. Deep into Q2 of the 2014 calendar year, U.S. retail store closing announcements reveal how the U.S. retail industry continues to redefine itself and how the largest U.S. retail chains are continuing to position and reposition themselves within it. That repositioning is raising questions about leadership all the way to the upper echelon of the U.S. retail industry, which is a worry to those perched there, but a welcome relief to everybody else.

American Eagle is the latest U.S. retail chain to add triple digit store closing numbers to the 2014 Store Closings Roundup list. Brookstone will be the next major retailer to put itself on the bankruptcy auction block next month. The number of Sears stores closing has increased by 80. The number of Radio Shack store closings has decreased to 200. The percentage of stores being closed by the newly merged Office Depot and OfficeMax is 21. The percentage of stores being closed by the now liquidating Coldwater Creek retail chain is 100. Those on store closing watch are definitely at a disadvantage in 2014 if they're not keeping an accurate scorecard.

Curious about how the liquiidation of the latest bankrupt U.S. retail industry chain was progressing, I wandered into a Coldwater Creek store not long after its going out of business sales began. Looking at the Coldwater Creek fashions on display there, I had a hard time understanding in what workplace, party, family gathering, or shopping center I would see the women who would be wearing these clothes. Looking at the other empty-handed bargain shoppers, it seemed as if they were having trouble understanding too.

I heard one of the going-out-of-business-sale shoppers ask one of the Coldwater Creek employees if just this particular location was closing down. The employee matter-of-factly informed her that the entire chain was going out of business. The shopper's response? "That's interesting."

Not "unfortunate," not "tragic," not "shocking," just "interesting."

What I thought was "interesting" was that exchange. I also thought the merchandise selection and the prices - even at 30% off - were not much more than interesting. Outside the Coldwater Creek front door, though, when looking at all the choices which seemed to be more trend right and price point friendly, what was happening inside of Coldwater Creek really didn't seem that interesting at all.

Coldwater Creek hadn't reported an annual profit since 2007. Back in 2008, I wrote an article about the "circle of sameness" which is the phrase that former CEO Daniel Griesemer used to describe the company's lack of a unique selling proposition (USP) to differentiate it from its competitors, which he identified as the root cause of the loss of profitability.

At the time, Griesemer seemed to conceptually understand how Coldwater Creek had trapped itself in the "circle of sameness," and seemed confident that he had the vision and ability to lead the company back out of it. But Griesemer apparently couldn't effectively translate his conceptual understanding into actions that made a big enough or a positive enough difference in a short enough period of time, and "resigned" in 2009 from his position as director, president, and CEO of Coldwater Creek.

Losing your sense of identity in a marketplace crowded with easily identifiable retail fashion favorites is a common story line shared by now defunct retail chains. But perhaps the Coldwater Creek bankruptcy story is also a cautionary tale about the wisdom of a leadership structure that allows one person to hold the titles and responsibilities of the three highest senior positions in the same organization. Talk about a circle of sameness.

According to the most recent Annual Corporate Directors Survey published by PwC, there is a trend towards splitting up the power structure by actually filling different executive leadership positions with different people. The discussion about the wisdom of doing this usually focuses on accountability and corporate governance, and it's easy to see why. But perhaps the discussion should (or does) extend to innovation and leadership creativity.

The upside to the combined chairman/CEO role is that nobody else has to be consulted before important executive decisions are made. The downside is that nobody else is consulted before important executive decisions are made.

Sure it's quick and easy to eliminate the possibility of leadership disagreements. But it seems only logical that a singular perspective in the highest executive positions is only a good strategy if the singular perspective is working.

Obviously the singular perspective of Chairman/CEO/President Griesemer wasn't working. So he was replaced by founder Dennis Pence, who singularly took over as Chairman/CEO/President. And when Pence's singular leadership didn't work, Pence retired, and the new Chairman/CEO/President Jill Deal took over and singularly led Coldwater Creek the final distance to its demise.

None of these three leaders had the singular answer for Coldwater Creek. But maybe together they would have. Three people with three different perspectives holding three separate executive positions might have been able to figure it out.

Or not. We'll never know. It's a conceptual thought, rather than a literal suggestion that these three particular individuals could have been the effective executive mastermind team that could have successfully rescued Coldwater Creek from extinction.

The point is that Circuit City had the CEO/Chairman mashup of singular thinking too. And perhaps it is not a coincidence that other struggling retail chains at the top of the 2014 Store Closings Roundup list like Sears and Staples are also operating with a CEO/Chairman singular thinking mashup organizational structure.

While there was speculation and active campaigning against renewing Mike Jeffries' contract with Abercrombie & Fitch in 2014 after several years of decline and public relations nightmares, Jeffries did retain his position as CEO, but was stripped of his chairman seat in the executive boardroom. Apparently it was no longer in the ongoing interest of Abercrombie & Fitch for one person to have the ultimate authority with every executive decision, especially when that one person has the reputation and controversial leadership perspective of Mike Jeffries. It's not just about Jeffries in particular, it's questions about retail executive leadership structure that are leading to significant changes in the upper echelon of companies in all U.S. industries.

According to the PwC Corporate Directors Survey, 55% of the companies responding have separated the role of CEO and chairman already, and half of the companies with combined CEO and chairman roles were actively considering splitting them up at the time of the survey. In another survey - the 2014 RHR International CEO Snapshot Survey - there are two major concerns of CEOs at companies with annual revenues higher than $1 billion. Those concerns are disagreements with their board of directors, and increased scrutiny of their performance. The CEO survey respondents viewed both of these things as a threat to their job security.

And the choir sings hallelujah.

Performance accountability and balance of power in the highest ranks of U.S. corporations - imagine that! How exactly the collective intelligence of U.S. captains of industry came to believe that omniscient CEOs should have to answer to noone is a mystery. Won't It be "interesting" to see how U.S. business, capitalism, and the economy changes after we all finally awaken from that dream.

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Biggest Challenge For New Apple SVP On the 13th Anniversary of Apple Retailing - Can Ahrendts Change Apple Store Momentum to Extend the Retail Legacy?

Monday May 19, 2014

On today's 13th anniversary of the opening of the first two U.S. Apple retail stores in 2001, the news about Apple retail stores is all about Angela Ahrendts, the new Senior Vice President of Apple Retail and Online Stores that it seemingly took a $68 million signing bonus to lure away from luxury UK retailer, Burberry. While the current Apple buzz is focused on the plans for the future that the new Apple SVP revealed this week, the biggest change for Apple retail managers, employees and customers is not found in the what of Ahrendts' plans. Rather, it's the how of Ahrendts' leadership style that will make the biggest impact on the most productive, most enviable and most duplicated retail chain in the world.

Unfailingly, Apple retail stores are ranked as having the Best Sales Per Square Foot, Best Global Brand Value, and Most Innovative Retail Companies lists. Impressive accomplishments, especially considering that Apple has not consistently been an exemplary retailer in terms of employee satisfaction, and customer satisfaction. In the long-term the exemplary recognitions are unsustainable if the employee and customer satisfaction challenges continue.

Reportedly it was Ahrendts' predecessor John Browlett who changed the trajectory of Apple retail stores for both employees and customers with some strategy and policy changes that were, in a word, culture-busting. And even though Browlett was only allowed to do cultural damage for 6 months, his absence, and the absence of any designated retail stores executive leader for the past year and a half hasn't undone the damage.

So while it's very exciting to hear about Ahrendts' plans for Apple retail expansion in China and in-store mobile payments technology, Ahrendts' biggest opportunity to make a great retail chain even greater depends on her ability to change the momentum of the cultural decline. Most likely there is some cultural shifting included in Ahrendts' announced plans to redesign the Apple Store customer experience. There will have to be, otherwise the customer experience changes won't stick.

It's not clear beyond the usual bravado of a visionary creator how much clarity Steve Jobs had about the revolutionary impact the Apple store retail model would make in the evolution of retailing. Already it seems like Ahrendts both understands and respects the Apple retail legacy. Now we'll be watching to see if she understands the how behind what she plans to do, which will enable her to extend and expand that legacy.

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Nearly 900 Store Closings From Aeropostale, Coldwater Creek and Family Dollar Give Warnings to the Largest U.S. Retail Chains (ARO, FDO)

Wednesday April 30, 2014

The 2014 Store Closings Roundup expanded significantly in April when Aeropostale (ARO) added 125 store closings, Coldwater Creek Added 365 store closings, and Family Dollar (FDO) added 370 store closings to the list. Well past the post-holiday store closing rush, these second quarter triple-digit store closing announcements should serve as a noteworthy warning to all of the largest U.S. retail chains about the instability of shifting retail sands and the consequences for losing your bearings or your foothold.

Aeropostale is the most recent retailer to add its triple-digits to the 2014 Store Closings Roundup list. Today Aeropostale announced its intention to close 125 of its P.S. from Aeropostale stores, the stores that were designed to capture the brand loyalty of the tween market. The concept behind the spinoff chain seemed viable when it began in 2009. If tweens love to wear the clothes of their teenage siblings (which they do), why not re-create some Aeropostale styles just for the tween niche?

It was just five years ago that this thought process launched the first P.S. from Aeropostale spinoff stores. At that time, Aeropostale was one of the few recession-proof darlings of the U.S. retail industry. At that time, it had delivered 11 consecutive years of positive sales growth comps. At that time, Aeropostale was THE private label, value-oriented, not-too-trendy brand of choice for high school hipsters (or some other word that teens were actually using in 2009).

What a difference half a decade makes.

It was a gutsy choice for any retail chain to be in launch mode in 2009, when so many of the largest U.S. retail chains were in abandon-ship mode. It was particularly gutsy for Aeropostale to be launching a new concept because almost at the same time, it was closing its Jimmy'Z concept stores, which had unsuccessfully attempted to maintain a relationship with its high school target market after graduation.

When the P.S. from Aeropostale chain first launched, its major tween fashion retailing competition came from Abercrombie & Fitch's abercrombie kids, Gap Kids, and Justice for Girls. Five years later there are now about 150 abercrombie kids brick-and-mortar stores, more than 200 GapKids stores and more than 900 Justice for Girls stores operating in the same malls where the P.S. from Aeropostale stores will be closing down by the end of the year.

Granted, sales of tweenie bopper fashions overall hasn't been stellar lately, but they haven't been bad enough to warrant triple digit store closings for any tween chain other than Aeropostale. And since the P.S. offerings are the low-priced option of the four, I don't think the changing "mom shopping trends" explanation that Aeropostale's CEO Tom Johnson offered was complete. Convenient, but not complete.

The thing is, since Aeropostale only sells its own private label brands, not only do Aeropostale's leaders need the expertise to keep up with a constantly evolving retail industry, they also need the expertise to compete with fast-moving fast fashion trends of fickle tweens with the attention span that is not much longer than the average length of a fashion blogger's YouTube video of the day.

While it resonated well with Great Recession shoppers, Aeropostale is just one of many retailers that hasn't made the connection in the post-recession era of the Empowered Consumer. It could be Aeropostale's fashions which are the challenge, it could be Aeropostale's retail customer experience, or it could be an infinite number of combinations of the two.

Aeropostale's private label-only retail business model makes its success not just doubly difficulty, but exponentially complicated in a disrupted retailing environment that is constantly finding itself redefined by the whims of its empowered consumers. Consequently, Aeropostale's leadership team needs to be exponentially more savvy in order for the company to rise to the challenge.

Unfortunately long history in the executive ranks can be more of a hindrance than a help these days if long-term leaders are trying to recreate past success using strategies that worked in a retail paradigm which no longer exists. That's not just the leadership challenge for Aeropostale and its CEO Tom Johnson, it's also the challenge for other retailers like Abercrombie & Fitch (Mike Jeffries), Staples, (Ron Sargent), and Family Dollar (Howard Levine).

The other most significant store closing news in the month of April was the announcement of the complete liquidation of the Coldwater Creek retail chain. This week Coldwater Creek got approval to start liquidation sales at all 365 of its retail store locations on May 8th, which is just ahead of one of its formerly best sales holidays, Mother's Day.

Like Sears (SHLD), Coldwater Creek was first a successful mail order business. Like Coldwater Creek, Sears is in danger of losing it all after losing its soul in the "circle of sameness." Likewise troubled retailers like JCPenney, RadioShack, and Kmart need to do what Coldwater Creek wasn't able to do, which is reclaim a unique selling proposition before downward momentum is too overwhelming to turn around.

Like both Coldwater Creek and Aeropostale, all U.S. retail chains near the top of the 2014 Store Closings Roundup list would also do well to remind themselves that past successes no longer carry any kind of guarantee of future existence.

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Retail Customer Experience Management Not New, Not Difficult, Not Understood - Customer Experience Report vs. a Perfect, Real Customer Experience

Wednesday April 30, 2014

"Customer experience management" is being talked about these days like it's the new black in retail industry management. Of course, the notion of creating and managing a "customer experience" is not new at all. It's just that until the leaders of some of the largest U.S. retail chains reached the bottom of their old school bag of marketing tricks, they weren't willing to earnestly embrace customer experience management as a necessary strategy. Why?

According to a report released this month by the Harvard Business Review (HBR), the deinition of customer service management is "the collection of processes an organization uses to manage customer interactions across the enterprise." Based on that definition, the HBR report concludes that customer experience management is a change management challenge that's difficult to integrate, and even more difficult to justify in terms of ROI.

Based on these premises, it's no wonder that customer experience management seem like a undesirable strategy to most retail leaders. Lucky for retail leaders, though, I think these HBR premises are overcomplicated, and therefore, false premises on which to base any conclusions about today's best practices in retail customer experience management.

One of the conlcusions from this HBR "Lessons from the Leading Edge of Customer Experience Management" report is "The days of the single customer touch point are long gone." First of all, there never was a day when there was such a thing as a "single" customer touch point. Conversely (and seemingly in contradiction to that), there is nothing to manage in the customer experience except the impact you're making on your customer with a single touchpoint. It doesn't matter whether that single touchpoint is in social media, on a mobile phone, or in a brick-and-mortar store. Your retail experience is judged by the customer one single touchpoint at a time.

This HBR customer experience management report also asserts, "There's no question that customer experience management is hard." I assert that there IS a question... about that HBR assertion. It's been my experience, both as a customer experience consultant and as a customer, that creating and maintaining a customer experience is only as hard and as complicated as we make it out to be.

At its core, creating a retail customer experience is a matter of three primary things - clarity, alignment, and repetition. Be clear about what you want to create, align absolutely every aspect of your company's practices, paradigms and people behind that clarity, and then rinse-and-repeat every day in every way with unwavering commitment. Contrary to the HBR conclusions, that's not "hard."

What IS hard is staying singularly focused on the customer long enough to gain clarity about crafting an experience that has value to them. What IS hard is getting rid of all the people, practices, and paradigms that are not aligned with the clarity of your customer-centric vision. What IS hard is not allowing yourself to get distracted by things like same store sales, share prices, big data overload, and stock analyst expectations, which want to pressure you to choose short-term gain over long-term managerial common sense.

What IS hard is not overcomplicating the whole thing. And what makes all of it harder than it needs to be is a fundamental misunderstanding about what a "customer experience" actually is.

I recently stumbled upon a perfect example of a "perfect" customer experience... read the rest of the story >>

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Retail Auto Dealers Improve Customer Service, Mercedes-Benz Dealers Pay for Bad Customer Service, Toyota Delivers Priceless Brand-Building Service

Monday April 28, 2014

Customer service at retail auto dealerships is improving along with customer satisfaction, according to the most recent annual JDPower Customer Satisfaction Index (CSI) released earlier this month. Based on the opinion of approximately 90,000 auto owners and lessees, overall, the service quality, service initiation, service advisors, service facilities, and vehicle pickup services of the most popular automobile brands is better now than it was a year ago.

Of course the JDPower rating and ranking list is focused only on the service department of retail auto dealerships. But more than any other retail product, service satisfaction after the sale is tantamount to the kind of customer loyalty that guarantees future repeat sales.

So how did the conclusions of the 2014 JDPower Customer Index translate in a real-life auto dealership customer service experience I had about a week after the rating and ranking report was released?

In the midst of a multi-day road trip from California to Texas, my Toyota Prius had an urgent message to communicate to me - "OIL MAINTENANCE REQUIRED." At least it seemed urgent, judging from the size and the wording and the prominent positioning of the message on my dashboard. At any time a message like that appeared, it would have produced a slight bit of uneasieness for me. At nearly midnight while driving on a neverending flat stretch of Texas nothingness, it caused me more than a slight bit of angst.

Not sure if this warning from my Prius meant "It would be a good idea to check your oil in the not-so-distant future," or "Drive another mile and you'll live to regret it," I pulled off the side of the country highway to determine how "required" my oil maintenance really was. I could find nothing in my owner's manual or on my smartphone Google search which led me to believe that my engine was in danger of a meltdown, so I decided it was safe to drive the last 60 miles into Abilene.

The first thing the next morning, I was happy to discover that there was such a thing as an Abilene Toyota dealership and I showed up there without an appointment. A service advisor, Martin, greeted me without a hint of annoyance at my presumptuous unscheduled arrival. He was also not the least bit condescending when he explained the significance and non-urgency of this particular warning message, which really was just a "Time for an oil change, please" nudge.

Instead of just hauling my Prius directly into the oil change bay, Martin first consulted his computer to double-check if the car actually needed one. Martin's search told him that, in fact, an oil change was not yet needed, and he didn't hesitate to tell me so. Instead, it was the automated service notification system that needed tending to, and Martin reset that in about 62 seconds.

After that he graciously answered my question about where to add windshield washer fluid, and then he refilled it himself. He also checked the other fluids, eyeballed the condition of my tires, and told me how to access the battery in the back of the car should I ever need a jump. (I'm really not such a helpless girly girl about auto maintenance, it's just that this is a newish car - I swear!)

Before I left, Martin and I also had a friendly chat about his native New Zealand, and he gave me a recommendation for an errand I had to run in Abilene before continuing my cross-country trek.

- Cost of "OIL MAINTENANCE REQUIRED" - $ 0.00
- Cost of Quickie Maintenance Check - $0.00
- Cost of Expert Maintenance Instruction - $0.00
- Value of a trust-building, brand-enhancing, customer-friendly interaction with a completely charming and professional Toyota representative named Martin - Priceless

There are some things that money can't buy. For everything else there's Dodge, Jeep, Ram, and Subaru.

Cheap shot, but these brands have been at the bottom of the JDPower Customer Service Index for the past two years. It is only fair to point out, though, that Toyota itself is only in the #6 position on the 2014 JDPower CSI. I haven't had personal experience with the top five auto brands on this year's CSI list, but I say if Buick, Volkswagen, GM, MINI and Chevrolet are even better than my exemplary Toyota customer service experiences so far, then they must really have some seriously fantastic customer service mojo going on.

It would also be fair to point out that Jeep, Subaru, and Dodge fare much more favorably on the 2014 Brand Keys Customer Loyalty Engagement Index. In the opinion of the Brand Keys list makers, Jeep is doing as well as Mercedes and Lexus, Subaru is doing as well as BMW, and Dodge is not doing too bad at meeting and exceeding expectations and building customer loyalty. The Brand Keys people aren't specifically transparent about their measurement criteria, except to say that they measure the aspects of the customer interaction that are engaging, loyalty-building, and ultimately profit-making.

Reportedly the CEO of Mercedes-Benz USA is none too happy with how Mercedes dealerships are measuring up compared to other luxury brands on the annual JDPower CSI. According to a report by Automotive News, because of the last two year's JDPower ratings, Mercedes dealerships with low marks for customer service will now be required to obtain and pay for consulting services to help them elevate their customer service performance and perception. This "penalty" will reportedly cost the service-challenged dealers "thousands" of dollars. If nothing else, this should send a clear message to Mercedes-Benz dealers that leaders of Mercedes-Benz USA sincerely believes in the value of the Mercedes-Benz brand reputation.

This is the kind of uncompromising action which moves customer service out of the realm of lip service and platitudes and into the paradigm of tangible actions, measurable results and real customer impact. Hopefully there is also an equally resolute rewards strategy being put into place for the retail Mercedes dealers with the highest customer service marks. In order to create genuinely engaged dealers, CEO Steve Cannon will want to also give dealers a positive reward to move towards, not just a negative consequence to avoid.

But annual lists are annual lists, and rankings are rankings. They each have their own criteria and they come to different conclusions based on those criteria - good, bad, right, or wrong. Why should Cannon, or any other retail industry leader pay any attention to a JDPower, Brand Keys, Brand Value, Most Admired, or any type of rating and raking list, much less take action based on the conclusions of those lists?

For retail auto dealers, the answer to that question is clear and concise. According to a recent report by marketing firm DMEautomotive, 16% of consumers are buying cars without even test driving them these days, and 80% of consumers do most of their auto decision-making based on Internet research. You know the old axiom "You never get a second chance to make a first impression?" In today's world of U.S. retail auto sales, a retail dealer may never get a chance to make any impression at all if a car shopper's first impression was a JDPower report posted on the Internet which says their customer service sucks.

So, in that way, Cannon's strategy is exactly on point and proves that he understands that the Mercedes brand is only as valuable as its suckiest customer service interaction at its lowest-rated retail dealership. Which also explains why fifteen minutes of Martin's time spent with me, with no service revenue to show for it, was Toyota salary money well spent. Hopefully Toyota corporate leaders fully understand and appreciate that Martin's contribution to the Toyota bottom line was significant the day I rolled into his service bay, even though it can't yet be quantified. I certainly know I get it.

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