Sears: The world’s slowest liquidation sale

“I see dead people…they only see what they want to see.  They don’t know they’re dead.”

- Cole Sear in The Sixth Sense

There probably was a time when Eddie Lampert honestly believed that Sears and Kmart could be resurrected as competitive retailers. But the concept of putting together a mediocre (and declining) department store, with an also-ran to Walmart and Target, was failed from the start.

In the intervening nine (!!!) years, Lampert has never once articulated a strategy for fundamentally improving the value proposition of either brand that made any sense.

On the contrary, he organized product and business unit teams into “competing” merchandise categories despite overwhelming evidence that consumers wanted more integration, not less. He required that every individual product earn a competitive ROI when every winning retailer on the planet understood the notion of category management and market-basket profitability. He starved both nameplates of capital when each was already woefully behind best-in-class competitors. He cut expenses to the bone when it was clear that both Sears and K-mart had a revenue problem, not a cost problem. He closed dozens of stores, further exacerbating both brands’ lack of critical mass in many markets.

Of late, he’s been pushing two ridiculous notions. The first is the idea that Sears is becoming a “membership” company. Please. This is mostly a transparent customer data grab. The value proposition of “Shop Your Way” is weak and the idea that being a member conveys any real sense of brand loyalty, engagement or fundamental profitability would be laughable if the whole endeavor weren’t so sad.

Crazy Eddie’s other big idea is transforming Sears into an “integrated digital platform.” For this to work you have to believe that Sears can compete effectively with Amazon–not to mention a whole host of leading multi-channel retailers–or that you can somehow win in an omni-channel world with a crappy, declining and shrinking brick and mortar base. Both defy basic logic.

Whether Lampert is delusional or not remains irrelevant. Whether by design or desperation, Sears has been liquidating for years.

Sears can certainly create liquidity for a bit longer by continuing to off load assets. But any realistic hope that Sears can pull out of this dive has, sadly, long since passed.

Dead man walking.

 

 

Neiman Marcus & Target: A glorious failure

“Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.”

-  Samuel Beckett

If you pay attention to this sort of thing, you know that several months back Neiman Marcus and Target made a big splash when they announced a partnership to jointly market a limited collection of fashion items for the holidays. This announcement was followed by a lot of PR hoopla and a high-profile television and social media advertising campaign.

And guess what? It was a bust.

The product offering failed to generate the sales frenzy that past designer collaborations from Tar-zhay have, and the merchandise has been marked down 50 – 70%. The media are now out with their post-mortem bashings, many taking the “I knew it was a bad idea all along” route.

Having previously led strategy and corporate marketing at Neiman Marcus for several years, I’ve gotten plenty of questions about my take on the strategy and its execution (NOTE: full disclosure, I remain a Neiman’s investor). Frankly, I think much of the criticism misses the mark entirely.

Clearly, a lot of the execution was messed up. Prices were generally too high, designer brands were extended too broadly and some of the product was just plain goofy: a $50 Rag & Bone boys’ sweater? That was never a good idea.

Big picture, however, the concept was fundamentally good for both Target and Neiman’s. Target is well-known for enhancing its fashion cred with such partnerships; so for them, this was a no-brainer. If they made any money on it, all the better. But the real value is in brand enhancement.

For Neiman Marcus, the strategic value may be less obvious but, in essence, their foray into “mass-tige” is no different from Karl Lagerfeld or Jimmy Choo doing their special offerings at H&M. The goal is to generate buzz and expose their brands to a demographic that they need to cultivate for the long-term. Forging a longer-term and/or more broad partnership would be dumb. But experiments, such as what was tried here, can be shrewd moves indeed.

Which brings me to my last point. What gratifies me the most is that Neiman’s actually tried something bold and, arguably, counter-intuitive. Neiman Marcus’ last CEO–and my former boss–Burt Tansky was a brilliant merchant and remains a luxury and fashion industry icon–and rightly so. But he was hardly a risk-taker and fundamentally not wired to say ‘yes’ to strategic innovation. Kudos to Karen Katz and her team for being willing to push the envelope.

It’s so very easy to label something a failure after the fact and to castigate management for its ineptitude. The far easier path for leaders of course is to never try. You rarely get criticized for the things you didn’t do.

It’s a terrible strategy to eliminate the possibility of failure. Great companies and great leaders are not characterized by an absence of failure.

Without trying, there is no growth. Without failure, there is no learning. The key is to fail better.

So was the Neiman Marcus and Target partnership a failure? In the immediate-term, definitely. But the overall grade from where I sit is “Incomplete.”

If the lesson Neiman Marcus takes away from this project–and it is a project, not a strategy–is to pull back on innovation, to stop experimenting, than it will be a huge waste of time and resources. If it strengthens their resolve, if they apply their learning to improve the process of innovation, than it will be the most glorious of failures.

JC Penney swings for the fences (Part 3): When the invitation is better than the party.

I like Penney’s new marketing campaign.

The TV ads featuring Ellen DeGeneres are captivating and funny–and seemingly everywhere. The print campaign does a solid job of re-branding JCP as fresh and contemporary, the monthly theme is carried through each piece beautifully and the featured items look great and seem well-priced. My only criticism is that the ads look a bit too much like Target (gee, I wonder how THAT happened).

But here’s the thing. Over the long-term the work of marketing is to differentiate the brand, create strong preference and reinforce loyalty/advocacy. Penney’s won’t win without doing a much better job of attracting and retaining a new generation of consumers and increasing the trip frequency, average purchase size and/or retention rate of the current base.

In the short-term, the work of marketing is to get the target customers’ butts in the store (or drive them to the website). I suspect the new campaign IS elevating interest in JCP and starting to drive incremental traffic. Yet while Penney’s has improved their presentation markedly, the stark reality is that both the product assortments and overall experience are still pretty much the same–i.e. unremarkable in most instances. And unlike Apple and Target, Penney’s store fleet is a grab bag of some very good locations with a whole bunch of mediocre and lousy ones.

We all know that when the invitation is better than the party, we aren’t very likely to get fooled the next time around.

 

 

 

Discount Nation and the sucker price

When was the last time you went to Macy’s or Bed, Bath & Beyond or any furniture store and paid full-price?  Did you actually pay for shipping on any e-commerce purchases during the holiday?

At most retailers, regular price is the sucker price. You only pay it out of desperation or ignorance.

Walk through any mall and you are inundated with sales signs, with coupons and with triple rewards points.  Buy one sports coat at regular price and get a second one at half-off?  Yes, please.

One retailer–I’m looking at you Gap–even put their whole store on sales for several hours during the run up to Christmas.

It makes perfect sense that product gets marked down as the season draws to a close.  It makes sense that your best customers get rewarded for concentrating their share of wallet with you. And faced with an intensely competitive market, one must certainly be mindful of maintaining market share.

But at what price comes the glory of same-store sales growth?

For years we have been teaching consumers that there is no integrity in our pricing. We have become a “discount nation”, bribing the promiscuous shopper to choose us over the competition while needlessly giving away margin to potentially loyal and profitable customers.

I don’t believe for a second that we are going to see an end to rampant discounting and blanket promotions any time soon. After all, it was just a few weeks ago that Target announced a new credit card that offers a straight 5% off all purchases.

I do believe that companies that deliver truly compelling value propositions and experiences based on a deep understanding of customers needs, wants and long-term profitability will win over the long-term.   I do believe that the best brands–think Apple, Nordstrom and Coach–know how to drive their business at regular price.

Those brands do the work of customer-centricity.

Those other brands?  We know what you are.  All we are doing is negotiating.