Retail Industry Blog

The latest retail CEO to bail out of the boardroom on a golden parachute is Charming Shoppes’ Dorritt J. Bern. After announcing Charming’s strategy to eliminate 150 corporate and field management positions, cut 200 full-time home operations positions, and close 150 stores earlier this year, Bern just announced her own elimination this week. Shortly afterwards, the media announced the $5-6 million she will be paid to leave. Bern should have used a better contract negotiator. Six million in CEO-dollars is more like a yellowed bed sheet than a golden parachute. I wonder how much the hundreds of other ousted employees got paid to get fired.

One of Charming’s chains is Petite Sophisticate. I used to be a loyal Petite Sophisticate customer until the styles got irrelevant, the fabrics got cheap, and the sales people got pushy. I guess in a way Bern is being held accountable for that and whatever else has caused Charming’s stock to plunge. But her $6 million punishment is kind of like being grounded and confined to your bedroom with nothing but your plasma TV, iPhone, high speed internet, and PS2 to entertain you.

It would have been fun to listen in when the first CEO convinced a board of directors that being at the top of the corporate ladder is akin to the being at the top of the professional sports ranks. That was a masterful sales job. I would be willing to bet it was a sports agent turned corporate contract negotiator who pulled it off the first time. The notion that a company should pay a CEO vast sums for getting fired because the firing might have a detrimental effect on the CEO’s future earnings is quite a notion indeed!

Admittedly, the half life of a retail CEO seems to be getting shorter. Some of this year’s more notable short-timers include these high profile CEO’s:

• Daryl Brewster led Krispy Kreme’s stock price from about $9.00 to around $3.00 in just two years. He received $2.8 million for that 2-year accomplishment when he resigned in January for “personal reasons.” I should hope that a 66% decline would be “personal.”

• Paul Harrington resigned in March, 2008 after just 2 years as the head of slumping sales for Reebok. He took his good-bye bonus to CA to “pursue new career and business opportunities there.”

• Woolworths was much less kind when they booted Trevor Bish Jones out of his corner office. Not only did he get a pitiful one-year salary severance, he didn’t even get to pretend that his departure was in the pursuit of some greater happiness. Woolworths’ press release bluntly announced, “It has been agreed between the Board and Trevor that this is an appropriate time to seek new leadership for the business.” Ouch, Trevor. You might want to think about hopping over the pond where we hold our ousted corporate failures in greater esteem.

• Also this week, John Poon resigned as Esprit Holdings’ deputy chairman and CFO, claiming he had no disagreement with the board. While it’s nice to believe that Poon skipped happily out the doors towards “his intended pursuit of other interests,” I have to believe that the board had at least a little bit of disagreement with the 27% drop in share prices this year.

When I was walking through the mall tonight I wondered which of the part-time retail employees might follow their retail career path all the way to that rock star CEO status or how many of them even wanted to try. It’s all glitter and glamour if you don’t mind the risk of public failure and professional humiliation. A good sports agent is a must.

There is a new shopping center that I pass almost every day, and today I opted to visit it in lieu of wasting my TGIF mood in rush hour traffic. It was a much larger hub of big boxes than I realized. Best Buy, Costco, Whole Foods, Target, Lowe’s, Borders, a 14-screen AMC theater and a 30 lane bowling alley were side by side, with lots of smaller and independent stores in between. Big retailers in a big shopping complex in the middle of a big residential area sounds like the makings of big profits.

To look at the packed-like-Christmas parking lot was to see tangible evidence of its success. To DRIVE the parking lot was to experience the tangible evidence of its failure.

There were obviously not enough spaces built into a parking lot shared by 7 big box stores. The parking lot layout was complicated, with stop signs about every 20 feet, or so it seemed. The multiple lanes of traffic that were converging in many unnecessary places were all trying to figure out the taking-turns system of chaos that was supposed to pass for traffic control. The spaces that were easily accessible to my desired Borders destination were across four lanes of traffic without a pedestrian crosswalk.

While the flow of cars into the complex was substantial, the flow of cars out of the complex was equally substantial. The exiting vehicles might have been filled with satisfied shoppers who had just pumped their Friday paychecks into the retail economy. But since there were two SUV’s that had been doing the parking space dance with me, I concluded that it was more likely that the departing cars were filled with people who, like me, had decided to take their paychecks home because it just wasn’t worth the effort it would take to spend them.

Considering how difficult it is for some people to earn their money, retailers just can’t afford to make it difficult for people to spend their money. While most retailers don’t have control over their parking lot design, they have complete control over the design of their shopping experience.

I was shopping in an Old Navy store this week and there was one particular corner of the store that was a jumbled mess. Upon examination it was easy to determine why. All of the petite sizes were hanging on the top bars, which were way too high for petite-wearing women to reach. So, the small sizes had been yanked off their hangers to be examined, and then draped on top of the lower racks when they were not purchased. Why any retailer would think it is a good idea to put the short-person sizes on the top rack I will never know. But I will tell you from first-hand experience that it is the rule, not the exception.

The good news is that in every jumbled mess, there is the opportunity to recover lost sales. With every hassle, there is the opportunity to prove to the customer that you are willing to make changes on their behalf. With every exodus is the opportunity to find a way to improve the invitation to come back inside.

I like the Corner Bakery. It’s a quick serve sandwich/soup/salad restaurant chain that’s almost as fast as fast food, but with menu choices that are real and fresh. I’ve been to several of their restaurants in more than one state, and it’s the high quality consistency of their food that’s impressed me the most. Until today.

Today I stopped on my way home to grab an early dinner instead of sitting in rush hour traffic. I ordered a scrambled egg sandwich from their breakfast menu and even though they’re not an all-day breakfast kind of place, they didn’t even hesitate to comply with my request. When my order was delivered, though, there were things on my sandwich that I didn’t order. As soon as I walked back up to the counter with my plate in hand, before I said anything, the cashier, Monica, said, “You didn’t want ham!”

Not only did the cooks have to make a breakfast item at the wrong time of day, now they had to make it twice for the same customer. Some very few minutes later Monica walked up to my table with a new steaming hot sandwich in one hand and a big hunk of my favorite chocolate cake in the other hand. (Besides being friendly, apparently the Corner Bakery employees are psychic too!)

What happened next is something I rarely experience as a customer. Monica said, “I’m sorry for the mixup.” No excuses. No justifications. No attempt to make me feel guilty for my unusual order. Monica made a simple, sincere apology, smiled, and walked away. Five minutes later the manager walked up and said, “How is your new sandwich?” With my mouth full, I nodded and smiled while he said, “Sorry about the first one.”

It was Service Recovery 101. They did nothing extraordinary, but it was not an extraordinary situation. Just like with their menu, the Corner Bakery team delivered a service recovery experience with rock solid consistency. They gave me a new reason to be impressed.

What is the measure of success at the end of a typical retail day? Sales? Number of transactions? How about the number of times you give a customer a new reason to be impressed? That’s a goal that any customer can get behind. It’s what motivates me to say things like, “I really like the Corner Bakery!”

Last week Best Buy executive Mike Vitelli told an Oppenheimer Consumer Growth Conference about the chain’s plans to expand growth and increase revenues. One of their more interesting strategies will be to expand their musical instrument category beyond the basic keyboards and guitars that are available in their stores now. After visiting a Best Buy store this weekend, it wasn’t a clarinet or a drum set that I missed or wished for.

I was looking for some kind of liquid solution that would clean CD’s. It seemed to my low-tech logic that this product would be located where the CD bulk media was sold. A logical assumption maybe, but it was not correct. So I walked up to the first blue polo-shirted employee I spotted and asked him where I could find CD cleaner. His response was “I’m sure they probably have it somewhere, but I’m a vendor. You have to find an employee.” He pointed me in a general direction and walked away.

Blue polo shirt #2 directed me to blue polo shirt #3 at the opposite side of the store, who I followed like a puppy dog as he snaked his way up and down the aisles, in the same manner that I had done myself on the opposite site of the store. Blue polo #3 asked blue polo #4, who pointed me to the corner before they both walked away together.

I didn’t find any CD cleaning solution shoved on the shelves in the corner next to the emergency exit door where I had been directed. Unwilling to seek out blue polo shirt #5, I walked out of the store empty-handed.

One of my long held beliefs is that most businesses don’t need to go out and get more customers, they just need to figure out how to keep the customers they already have. If Best Buy in particular, or the retail world in general asked its customers for strategies that would increase sales and drive growth, I wonder if the customers would suggest that they do something more, or just be better at what you do? If Mike Vitelli would have surveyed me while I was purchasing the cleaning solution from Wal-Mart just minutes later, I would have told him that he could have had my money if Best Buy had done better with the merchandise they have right now.

If your current customer service strategies allow the CD cleaner customer to walk out empty-handed, then what’s going to keep the trombone customer from walking out empty-handed too?

Back in February, Starbucks management made a bold move when they closed all of their 7,100 stores for 3 hours so that they could re-train their baristas on creating the best customer experience. With an average of 20 employees per store, that’s a staggering 426,000 man hours, more than $3 million in wages, and 21,300 hours of lost customer revenue. That’s what I call a customer service commitment!

When I read earlier this week that Starbucks was permanently closing 600 of its US stores, I had to wonder how they were feeling about their radical training effort. Today I went to my neighborhood Starbucks. After observing one transaction, I wonder no more.

As the customer ahead of me got to the front of the ordering line, the Starbucks barista immediately said, “Hello there! Long time no see!” Customer lady went into a long explanation about where she’d been. Barista girl smiled, and nodded, and listened politely to a much-too-long explanation of Customer lady’s recent whereabouts. When Customer lady finally took a breath, Barista girl said, “Are you still doing those tall lattes?” Customer lady said, “Yes, exactly!”

Barista girl walked away to make the tall latte, and Customer lady said to her friend, “I can’t believe she remembered that. I haven’t been here in FOREVER!” That was followed by more details about her recent activities, which caused her friend to smile, and nod, and listen politely.

The reason why a customer service moment like this is so important in a retail business is because it makes an impact on every person within observation range. Customer lady was impressed. Customer lady’s friend was impressed. I was impressed. And the 23 people who will undoubtedly hear the story from chatty Customer lady will be impressed too.

Any employee in any retail setting can find a way to put a personal touch into their work and make a positive impact on customers. The question most retail managers ask is “How do I motivate my employees to WANT to make a positive impact?” It took 21,000 hours and several million dollars for Starbucks to prove to its employees that it was serious about the Starbucks-branded customer experience. If the result is what I observed today multiplied by 7,100, then I don’t think they should regret one minute or one penny of their efort.

In the wake of a double-digit sales decline in Q1, baby-boomer clothing retailer Coldwater Creek had some explaining to do. At the 2008 Bank of America Consumer Conference, CEO Daniel Griesemer didn’t prop himself up on recessionary crutches when he spoke to investors. Instead he stated simply and directly that Coldwater Creek had lost some of its customers because it had “become part of the circle of sameness.” Kudos go to Griesemer for that insightful description.

There are many retail businesses in the U.S. that are trapped in that “circle of sameness” that Griesemer identified. You step into that circle when you first start copying your competitors. You get trapped in that circle when you start leading your business into becoming more of what you think you should be, instead of becoming more of what you are.

To break free from the circle of sameness, you first have to look around and realize that you’re in it. After that, it’s just a matter of reconnecting with the heart of your business and the soul of your brand. Griesemer knew that when he said, “Our clothes, in the past, have been inspired by sunsets and landscapes and wildflowers, very down-to-earth, accessible, with beautiful possibilities, and a sense of optimism. We need to recapture that sense of adventure…” Those statements proved that Griesemer had already exited the circle and was leading his team out of its confines.

By the way, Coldwater Creek’s stock was upgraded to “strong buy” last week for the first time in a year, in anticipation of its fall merchandise line. The current economy may be a problem for retailers, but it doesn’t have to be the excuse for staying stuck.

The State of New York announced this week that it is suing national pharmacy chains CVS and Rite Aid. Allegedly the NY outlets of these pharmacies had a bad habit of leaving food, medicine, and baby formula on their shelves well past the products’ expiration dates.

Certainly in every “Retailing 101” book there is a chapter on rotating perishable products. And certainly those basic rotation practices couldn’t be more important than they are for the types of products sold in a pharmacy. CVS and Rite Aid employees certainly must have received this news in their new hire training. So how could such a basic operational infraction occur in such consistently large proportions?

It might be the same thing that happened with Southwest Airlines before they grounded 44 planes in March which hadn’t received the required inspections and maintenance. It might also be the same thing that happened when physical appraisals were replaced by cursory reviews and computer comparisons in the home mortgage approval process at Washington Mutual.

Cutting corners is just not a good business practice. It’s different than cutting back, which is a necessary scaling down in response to business demand. Cutting corners, by contrast, is sacrificing quality by doing something cheaper or quicker. In a panic to keep pace or survive, businesses can’t afford to confuse cutting back with cutting corners. The consequences of that confusion could be dire.

Losing flight revenue for 44 planes for a day like Southwest did is bad. Defending yourself against consumer fraud lawsuits like CVS and Rite Aid are now doing is bad. Losing $24 billion, 3,000 employees, and 12 years of stock value like WaMu did is really, really bad.

But, if you add all of those consequences together, it’s still not as bad as losing your reputation, the integrity of your brand, and your customers’ trust. Just ask Arthur Andersen. In all industries, believe it or not, some things are more valuable than money.

It’s so nice that so many retail companies want my opinion these days! I’m not sure at what point it became SOP for anybody who sells anything to print information on their receipts about the customer service survey they are anxious for me to complete. And I really don't know when they all found an extra $5,000 in their budget for the prize drawing they are anxious for me to win after I fill out their survey. I have yet to see evidence that anyone has ever been awarded any of those prize monies, and I also have yet to see that anyone has ever listened to any of my comments.

Yesterday I was sitting in a neighborhood chain bakery that I frequent because they give me free wireless which I can use while I eat my lunch. My receipt was sitting on the table, and it sparked this conversation with one of the store’s employees:

BRIAN: (Pointing to the receipt with the survey and make-believe drawing info on it), “Do you ever fill out that survey online?”

ME: “Yes, I’ve filled it out several times. Do you want to know what I say?”

BRIAN: (Taking a physical step backwards), “I don’t know about THAT.”

ME: “Here’s what I say every time… The food is always fresh, and the employees are always nice.” (Brian smiled.) “The store is always freezing, and the silverware always looks dirty.” (Brian laughed. Apparently it wasn’t the first time he had heard the temperature and/or silverware comment.)

BRIAN: “Okay, well, make sure you fill it out again so you can win $5,000.” (Brian walked away.)

Perhaps in the quest for successfully working the survey system, we’ve forgotten the purpose of gathering feedback. There are some basic survey do’s and don’ts, and if they’re ignored, the survey that’s supposed to help you can actually hurt you.

Today I am back at the same restaurant again (typing this blog post with their free Wi-Fi). The food is fresh, the employees are nice, the store is freezing and I pulled eight knives out of the silverware bin before I found a clean one. But, I still went online and filled out that survey – again. And this time, I’m SURE I’m going to win that $5,000!

On an airline flight last night, the pilot got on the speaker system periodically to announce the score of the NBA final. I guess he didn’t want his California-bound passengers to feel like they were missing out on the important events happening 60,000 feet below them. At the point where the pilot announced that the Celtics were ahead of the Lakers 89-60, the male flight attendant serving drinks from the cart wedged against my left elbow let out a “Woohoo!” followed by the declaration, “I can't stand Phil Jackson!”

After prying my elbow free, I asked the flight attendant why he wasn’t a Phil Jackson fan. His response was, “He’s not anywhere near as good as he thinks he is. ANYBODY can look good when they’re coaching superstars.” That was some managerial wisdom from an unlikely source!

Any type of manager can excel when leading a team of Michael Jordans, Shaquille O’Neals and Kobe Bryants. But when the stats are down and the results are falling, how easy it is to mistakenly conclude that the team is to blame.

Managers who step into – or even assemble – an employee dream team can certainly revel in their success. But the managers who can take any ragtag collection of players and inspire them to personal and collective greatness – those are the legendary leaders.

A list of the world’s largest retailers popped into my email today. As I was scanning it, I remembered how shocked I was when I first found out that a company from Iceland was a major player on the global retail stage.

Iceland? The country has three puffins for every resident. People in Iceland are listed in the phone book by their first names, and they honestly think that gnomes live in the backyard bushes. Home to Vikings, volcanoes, glaciers and the 47th largest retailer in the world -- how is this possible?

Less than 20 years old, Iceland’s Baugur Group is already more profitable than US retail stalwarts like Nordstrom, Toys ‘R Us, and Saks Fifth Avenue. But, to the credit of the many major players it has surpassed, Baugur has never built anything from scratch. Rather, it acquires existing companies that have global expansion potential.

It’s no simple task, however, to merge the cultures, philosophies and management teams of two companies, as we observed in the ill-fated marriage of Sprint and Nextel. But apparently Baugur knows how to pull it off. A clue to how they do it successfully, I think, is found in the last words of their mission statement… "we provide our managers with unconditional support while demanding excellent performance in return."

This “giving to get” philosophy is not something that any self-respecting Viking would embrace, but apparently it works well for today’s Icelandic retailers. And for any managers who find themselves stepping into a leadership role with an existing operation, the give-to-get strategy is a nice trick to have up your managerial sleeve.