Will Story help Macy’s launch an exciting new chapter?

Macy’s just launched Story concept shops in 36 stores across the United States. The new “narrative-driven retail experience” occupies about 1,500 square feet in most stores. The move comes less than a year after Macy’s acquired the Story brand and made its founder, Rachel Shechtman, its brand experience officer. This is the latest step in Macy’s attempts to become more relevant and remarkable after years of declining market share and lackluster profitability.

Similar to the original Story boutique that opened in Manhattan’s Chelsea neighborhood in 2011 , Story at Macy’s will focus on one merchandising theme at a time, and completely change every few months. The first installation is called “Color” and features some 400 curated products from brands like MAC Cosmetics, Crayola, and Levi’s Kids, as well as dozens of other small business partners. More than 300 color-themed community events are planned to help customer activation. In a press release Jeff Gennette, Macy’s, Inc. chairman and chief executive officer, commented that “the discovery-led, narrative experience of Story gives new customers a fresh reason to visit our stores and gives the current Macy’s customer even more reason to come back again and again throughout the year.” 

In a Forbes post last year after the Story acquisition was announced I expressed two fundamental concerns about the new partnership. One was whether Shechtman and team were going have the room to truly innovate and to do so quickly. My fear was that Macy’s historically go-slow culture might stifle the necessary creativity and decisiveness. The fact that Story at Macy’s is a fully realized and well-executed concept that was brought to life in less than a year is encouraging. Credit should be given to Gennette for his willingness to experiment aggressively.

The second was less a concern, but more of a cautionary warning. Even if Story proved to be successful in its initial roll-out and gets scaled to most of the chain, it seems obvious that it will barely move the dial on financial performance or, more importantly, do much by itself to accelerate Macy’s move out of what I call the boring middle. Yet, as every journey must start with the first step, it is potentially an important piece of a broader renaissance that necessarily will take a lot of time and considerable investment.

A visit to the Story shop at Macy’s in Dallas’ Northpark Mall over the weekend reveals both the opportunity and the challenges. Story’s visuals are eye-catching and easily seen from the other side of the vast store, which is situated in one of America’s most productive malls. The merchandise presentation is eclectic and fun, albeit seemingly a bit random. Two associates stand ready to help, though I am the only potential customer on a Saturday afternoon. There are a lot of interesting impulse and gift items, but it’s hard to understand a cohesive value proposition that will drive meaningful incremental traffic given the frequently changing theme.

Story at Macy's features more than 400 products.

Most striking to this observer is how out of place Story seems—and how it calls attention to much of what is decidedly mediocre at a much better than average (in my experience) Macy’s location. Story’s bold design stands in stark contract to the rather stark and neutral visuals of adjacent departments. Most apparel and accessory sections throughout the store are swimming in a sea of sameness: rack after rack and tables stacked high with mostly uninspiring fashion, virtually every one topped with a promotional sign offering 25% to 50% off. While Story’s layout is relatively cozy and invites exploration and discovery, the rest of Macy’s main floor looks like just about every other moderate department store in just about every city I have been to in recent years, e.g. sprawling and unmemorable.

After visiting Story I was reminded of a time, many moons ago, when as a young management consultant getting paid far more than I was worth, I splurged on some large and rather expensive stereo speakers (note to Millennials: that was a thing at one point). As soon as I had my bright and shiny new toys wired to my old equipment, I quickly realized that what I already owned paled in comparison. It wasn’t long before I felt compelled to upgrade the whole damn system.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Sears tries small stores again and again. Here’s why they’ll fail once again.

Sears, aka “The World’s Slowest Liquidation Sale,” garnered a fair amount of attention recently with the announcement that they would open small stores featuring appliances and other home products called Home & Life. Perhaps having closed hundreds of stores over the past few years, the idea that Sears would “get off the mall” with new, more focused stores is interesting news and perhaps an early sign of resurrection? It’s neither.

Some of us may be old enough to remember that back in the ’90s and early 2000s Sears tried many iterations of exporting its signature home businesses into new formats that held the promise of being more competitive, convenient, customer relevant and sustainable. I’m one of those people. I was directly involved in many of them.

During my tenure—as well as before and after—we opened dozens of Sears Hardware Stores and acquired Orchard Supply Hardware. There were hundreds of so-called Dealer Stores that grew out of the original catalog business. At one point we operated more than 100 outlet stores. We tried various combinations of small-format tools, appliances and mattress stores. My team helped create and launch Sears Grand and The Great Indoors as large format off-the-mall stores where, among other things, Sears home brands were showcased in a more updated and convenient location. We also had the second-largest furniture business in the United States, which we tried to aggressively grow off mall. And, in a juicy bit of irony, those stores were called Homelife.

To varying degrees, and for various and sometimes complicated reasons, all of these efforts failed. While it may be interesting to debate what could have been done to assure better outcomes (spoiler alert: a lot), there are three powerful reasons a reboot of what is by now a very old strategy will almost certainly amount to zilch–plus or minus bupkis.

First, with the benefit of first-hand experience and a heaping spoonful of hindsight, I firmly believe that the one thing that could have saved Sears was to have created our own version of a home improvement warehouse or, even better, to have acquired Home Depot or Lowes at a time when Sears’ valuation would have made that realistic. Based on work we did during my tenure, it became increasingly obvious that the value in two businesses that drove most of Sears’ valuation (home appliances and tools) was migrating to these disruptive formats, and there was little we could do to stop it either with our mall-based format or through our powerful small stores. Without compelling participation in what is now by far the preferred way consumers buy these categories, Sears’ continued share loss—and long march to irrelevancy—was inevitable.

Second, what Sears is trying today is what I often refer to as attempting to be a slightly better version of mediocre.. Sure, some customers might find these more focused and better located stores a step up from the current Sears on-the-mall or online offering, but is that really delivering something truly relevant and remarkable? Of course not.

Third, even if these formats were able to gain some meaningful traction, Sears has little capacity to scale and has fallen so far below critical mass in many aspects of what is key to winning in today’s environment (marketing, sourcing and supply chain, most notably) that any positive momentum will be immaterial to any hoped for turnaround.

I, like so many other people, truly wish there were a better outcome for Sears. But as time goes on it seems increasingly obvious that the train left the station on those possibilities many, many years ago.

Today, sadly, all this thrashing is just lipstick on the pig. Dead brand walking.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Four truths and a lie from this year’s ShopTalk

Once again ShopTalk proved itself to be the must-attend retail event of the year. The 4th annual conference was both bursting with people and content, having grown to more than 8,000 attendees, five tracks and a solid number of prominent main-stage speakers across four action-packed days.

Most presentations and panels that I attended were strong. Yet a few speakers unfortunately hit speed bumps when their talks veered into shameless self-promotion, parroted trite expressions (“we put the customer at the center of everything we do”) or set forth declarations as bold new insight when they were merely observations that are obvious to anyone who’s been paying attention the past few years.

Nevertheless, as the dust settles, I came away with a few key points.

TRUTH: Embrace the blurThe delineation between physical and digital is increasingly a distinction without much of a difference . Most consumer’s shopping journeys involve a digital channel and the growing role of mobile makes the lines ever more blurry. While this has been true for years, many brands at ShopTalk seemed to finally be accepting this and taking necessary actions.

TRUTH: It’s about markets, not just physical locations. Just weeks after his brother Blake died, Nordstrom co-president Erik Nordstrom, in a refreshingly modest and honest fireside chat with CNBC’s Courtney Reagan, spoke of the company’s strategy to harness the power of stores and online to be more relevant on a market-by-market basis. He under-scored the reality that for many retail brands the store is the heart of an increasingly complex shopping ecosystem and that the customer is really the channel.

TRUTH: Physical retail isn’t dead. But it is very different. In some ways it seemed like attendees were officially cancelling the retail apocalypse. Sure many stores are closing: sometimes out of irrelevance, sometimes out of gross mismanagement or insanely leveraged capital structures, sometimes out of a needed correction to the ridiculous overbuilding of retail capacity. But Walmart, Target and many other brick & mortar centric retailers are showing new signs of life by treating their stores as assets, rather than liabilities. As just one example, investments in using the store as a key part of the supply chain (ship from store, order online/pick up or return in store, etc) are helping neutralize some of Amazon’s (and other’s) perceived superiority.

TRUTH: The problem is you think you have time. As many presentations centered on artificial intelligence, machine learning, robotics and the like, it seemed clear that the pace of technology adoption is only accelerating. Similarly, talks on shifting consumer behavior served as a stark reminder that customer wants and needs are growing ever more dynamic and more difficult to predict. And news of recent mass store closings and bankruptcies make it clear that those retailers that don’t move quickly and decisively are likely destined to die.

LIE: A slightly better version of mediocre is a compelling strategy. While I won’t name names, at least one retailer that featured prominently in the program may need more than a miracle on 34th Street to make them meaningfully relevant again. As the collapse of the middle continues apace, it seems increasingly obvious that some brands are making only incremental changes–or merely moving to where the puck is. What passes for innovation at some retailers might close competitive gaps, but whether it gets them to being truly remarkable is very much an open and critical question.

In addition to catching up with old and new friends, one of the things I like most about ShopTalk is the ability to get a robust and fairly comprehensive snapshot of where retail stands: the good, the bad, the ugly and, sometimes, the head-scratching. Regardless, I come away better educated, inspired and hoping that more retailers will see the light.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Macy’s and JC Penney earnings offer evidence of the stall at the mall

On the basis of early results (and specious or unreliable indicators), many industry observers predicted this would be the best holiday season in a long time. It turns out, eh, not so much. In fact, at least one guy was pretty skeptical all along.

But you don’t have to be some sort of retail savant (I’m not) or have the gift of prophecy (I don’t) to have seen this coming. While the idiotic U.S. government shutdown, along with every retailer’s favorite scapegoat (the weather), had a largely unexpected dampening effect, anyone who was paying attention could have predicted that retailers with highly customer-relevant and remarkable offerings would do comparatively well and that those stuck in the boring middle would continue to struggle. Which brings me to Macy’s and JC Penney, the two mall-based department stores that reported earnings this week.

Under the newish leadership of Jeff Gennette, Macy’s has embarked on a number of new initiatives, which my fellow Forbes contributor Walter Loeb recently outlined. While I applaud the company’s willingness to try new things, its results continue to be decidedly uninspiring. As sales continue to go nowhere, Macy’s has resorted to what just about every other retailer that can’t seem to get on a path to being truly customer relevant does—namely, cut costs and close stores. As the saying goes, when all you have is a hammer, everything starts to look like a nail. w

JC Penney recently reported fourth-quarter earnings and managed to top analysts’ estimates. And when we say “top,” we mean they were not quite as horribly sucky as anticipated. Same-store sales were down “only” 4%, and operating losses were only somewhat awful. And, you guessed it, the company also announced it was going to close a bunch of stores.

Amid the generally bad news—which comes, I might add, as Sears (its neighbor in hundreds of locations) hemorrhages market share—was one bright spot: The company did manage to reduce bloated inventory levels by some 13%.

New CEO Jill Soltau also said that the company “has the capacity to produce improved results.” You know, kind of like I have the capacity to complete a triathlon. So good luck and Godspeed to us both.

As Macy’s and JC Penney close the financial chapter on 2018 and try, yet again, to reset their overall cost base, there are five things that need to be kept front and center as we move forward.

1. The stall at the mall is real, and there is no going back. As I’ve written about many times, the moderate-department-store sector has been losing share for decades, first to discount mass merchants and category killers and then (mostly) to off-price retailers. The format is structurally disadvantaged. Accept the things you cannot change.

2. Stop blaming Amazon. To be sure, the growth of online, and Amazon in particular, has added extra challenges, but most of the share losses in the past decade have not been to online-only players, and as mentioned above, both these brands were struggling way before Jeff Bezos had impressive biceps. And by the way, I’m pretty sure there is no law against Macy’s and JC Penney having really good digital capabilities (see Neiman Marcus, Nordstrom et al.).

3. Get out of the boring middle. If you continue to swim in a sea of sameness, you are going to drown. If you continue to chase promiscuous shoppers, your margins will stay low. If you continue to try to be a slightly better version of offering average products for average people, your best-case outcome is average results. Better is not the same as good. You have to choose to be truly remarkable.

4. It’s a customer-relevance problem, not a cost problem. Given the structural issues facing mall-based retailers, as well as the broader shift to online shopping, we often jump to the conclusion that brands like Macy’s and JC Penney can shrink their way to prosperity. This is fundamentally wrong and, in most cases, ultimately destructive. It also belies the fact that plenty of “traditional” retailers have managed to thrive by opening stores and foregoing massive cost-cutting. Time and time again we see that brands that get into big trouble have a problem being customer relevant and memorable yet decide instead that they have a too-many-stores and too-much-staff problem. This is not to say that Macy’s and JC Penney can’t thrive with less square footage; they can and should optimize their store fleets. But there is plenty of business to be done directly in and, more importantly, by leveraging brick-and-mortar locations. As we move ahead, the overwhelming majority of Macy’s and JC Penney’s efforts must be about growing share with their target consumers through improved relevance.

5. Aggressive trade-area based goals. We need to get away from the hyper-focus on comparable-store sales and realize that online drives offline and vice versa—and that the store is the heart of most brands’ customer ecosystems. Accordingly, the metric we should pay most attention to is how retailers are gaining share (customer relevance) and profits on a trade-area by trade-area basis, regardless of channel. If Macy’s and JC Penney are going to be around for the long term, they likely need to be growing at least 3-5% in every trade area where they have stores and be growing faster than inflation overall. Closing many more locations risks impacting both customer relevance and necessary scale economies.

In the next year or two, things are likely to remain especially noisy as the long overdue correction in commercial real estate settles out and the weakest competitors make their way to the retail graveyard. And even if that were not true, both Macy’s and JC Penney face significant structural headwinds as well as daunting operating challenges making their way out of the boring middle—although, to be fair, Macy’s is definitely further along.

Despite the noise, from where I sit, one thing is clear: Neither brand will cost-cut or store-close their way to prosperity. If revenues don’t start to consistently grow faster than industry averages (and that’s likely to come with relatively flat physical-store sales and online growth of at least 15-20 %), then both chains will continue to lose relative customer relevance, and a downward spiral is likely inevitable.

A slightly better version of mediocre is rarely a winning strategy.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Sears lives to die another day

Against the odds—and over the objections of most creditors—Eddie Lampert has “saved” Sears, with a federal bankruptcy court judge approving the sale of the once-storied retailer to the billionaire hedge fund king.

At one level, we should admire the resilience of the former Sears CEO (and its principal shareholder, though ESL Holdings). Part Energizer bunny, part Michael Myers from the Halloween movies, part gag birthday cake candles, he just won’t die. At another level, it’s hard to imagine a bigger waste of time. Moreover, the idea that he is motivated to keep the company going to save some 45,000 jobs is laughable and undeniably cruel.

For more than a decade, we have witnessed the brand shrink and shrink. Under Lampert’s leadership, the majority of Sears and Kmart locations have been shuttered. Key brand assets have been sold off to keep the lights on. Comparable store sales have been down virtually every quarter since 2004, and e-commerce sales have consistently lagged the industry. Nothing in the latest Hail Mary move reverses a strong downward trajectory. In fact, the situation keeps going from bad to worse, and the current fragility presents growing challenges, as fellow Forbes.com contributor Warren Shoulberg highlights.

As I have touched on before, Sears has been in trouble for decades, and it’s highly unlikely that anyone could have restored the brand to its former glory, much less maintain it as a meaningfully profitable national retailer. While that may be an interesting thought piece or business school case study, the reality today is that Sears simply has no reason to exist in its current manifestation. Sears no longer offers anything that is remarkable to customers—and no strategic plan has been proffered to alter that. While there may be a few diehard fans (heh, heh) left, absent any nostalgic feelings, as a practical matter, no one will miss Sears when it is gone. There simply are plenty of better options to buy everything that Sears sells.

A Sears store in Hackensack, N.J. (AP Photo/Seth Wenig, File)

Despite being a former Sears executive, I now only wish the insanity would stop. There is no plausible scenario in which Sears does not keep shrinking into oblivion. There are few assets left to fund operating losses. The company will struggle to get creditors to ship it product. Its management team is in tatters. It has no clear target customer groups or compelling value proposition. It has little cash to invest in the areas that desperately need improvement—most notably its remaining stores. And the competition only continues to grow stronger and have greater scale to apply against any resurgence.

So the world’s slowest liquidation sale has entered yet another chapter. I will leave it to others to debate whether this particular move is merely a “scheme to rob Sears and its creditors of assets” or whether it is a good-faith effort to keep Sears as a going concern. Regardless, it is good news for the many thousands of Sears associates who get to keep their jobs for a bit longer. Sadly, though, for most of them, it only delays the inevitable.

As the former Sears CEO (and my former boss) Alan Lacy recently said, “We know how this movie ends; I’m just not sure how many more minutes are left.” Dead brand walking.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

On February 25th I will be doing the opening keynote at New Retail ’19 in Melbourne, Australia, followed the next week by ShopTalk in Las Vegas where I will be moderating an expert panel and participating in other events.