Pinning down what sells may be a lost art
Department store impresario Marshall Field’s strategy in the late 19th century was as simple as it was sure-fire.
“Give the lady what she wants.”
It helps, of course, to know what that is.
As retailers face mounting pressure to cut costs, boost profits and tag trends, they also are searching for something a little more old fashioned: merchants who know what will sell.
“This is the single biggest issue we face,” Urban Outfitters Inc. Chief Executive Richard Hayne said at a recent conference in Dana Point. “There’s nothing more important than people.”
Meanwhile, shoppers often know what they want, but they can’t find it.
“I like variety, and I don’t see a variety out there,” said Genise Brown, 36, a teacher from Signal Hill.
Retailers should loosen up a little, take some chances, she said. “Everyone has the same products. They need to have change.”
Part of the problem is that there has been so much change in the retail industry.
In earlier days, department stores dominated and were fertile training grounds for executives who learned all aspects of the business, including how to select shirts, pants and dresses and how to infuse each store with its own personality.
“I used to sleep in the store,” said Marshal Cohen, chief industry analyst for NPD Group, who began working in retail in 1973 as a trainee at Bloomingdale’s. “You tell me, who’s doing that anymore?”
Indeed, department store consolidation and the proliferation of specialty shops have created a sea change in an industry where fewer workers are rising from the sales floor or buying office to the executive suite.
From 1985 to 2005, almost 85% of the nation’s department store training programs were eliminated, executive recruiter Kirk Palmer said. “The bottom line is that large pipeline for talent really no longer exists.”
Store revenues suffer, and so do shoppers, who must slog through what is commonly described as a “sea of sameness.”
“Listen to consumers,” said Katherine Mance, vice president of the NRF Foundation, the research and education arm of the National Retail Federation, the industry’s largest trade group. “Consumer research is telling you, ‘I go into the stores and it all looks the same.’ ”
Shopper Sandra Moura agrees. “Everything’s so repetitive,” said the 20-year-old student from Manhattan who seeks out stores that “step up the trends” and “make something new happen.”
Moura likes European retailer H&M; and Forever 21 Inc. of Los Angeles, two companies known for fast fashion. But not Gap.
“It’s too generic,” she said.
Some blame the new bland on Wall Street.
As more retailers went public over the last 25 years, they became increasingly cautious. With eyes locked on the bottom line, companies began hiring outsiders who were good with numbers and operations but didn’t know much about how to get the right clothing on the racks.
“To really run your business and make it work, you’ve got to get the right merchandise into the store,” Cohen said. But today, he added, “financial guys,” not merchants, call the shots.
Companies that hire from outside the industry have maybe a 1 in 10 chance of succeeding, said turnaround expert Alan Questrom, who has led J.C. Penney Co., Federated Department Stores Inc., Neiman Marcus and Barneys New York, and is now a senior advisor at Lee Equity Partners, a private equity firm in New York.
“That doesn’t mean you can’t be successful,” he said. “But the law of averages is against you.”
Although there are still many skilled merchants in the industry, they are aging and not being replaced at the rate they once were, industry experts say.
Last month, Talbots Inc. announced that CEO Arnold B. Zetcher would retire from the Hingham, Mass.-based apparel chain in 2008 after four decades in retailing.
He got his start at Cincinnati-based Federated Department Stores at age 26. Retailing has become increasingly complicated, he said. It’s not just about knowing that a “blouse looks good in polka dots.”
Still, what looks good on Talbots’ customers remains uppermost in Zetcher’s mind. So he roams the stores regularly and monitors the selection of merchandise for the chain. Six times a year, he huddles with his senior merchandising team to select styles that suit baby boomers.
“We look at the product that’s going to be in the stores, and I comment on whether it’s appropriate or not appropriate,” Zetcher said.
Not everybody thinks such input from the top is necessary.
“You don’t have to be a merchant prince to run a large, complex retail enterprise any more than you need to be a Nobel Prize-winning scientist to run a drug or technology company,” said former Liz Claiborne Inc. CEO Paul Charron, a former naval officer who describes himself as “definitely not a merchant” despite his success with the women’s clothing chain.
“In 12 years, I never told somebody to put something in the line or take something out of the line,” said Charron, now chairman emeritus. “What CEOs have to do today is understand the marketplace in which they compete, the target consumer they’re attempting to serve and all the contributors to the business’ success. It’s not enough to have inspired product.”
Of course, a little inspired product wouldn’t hurt.
No company illustrates the problem the industry is grappling with better than Gap Inc., the nation’s largest specialty apparel chain. The San Francisco-based parent of about 3,200 Gap, Old Navy and Banana Republic stores hired Paul Pressler four years ago from Walt Disney Co., where he ran the theme park and resort division.
Unable to yank the company from an extended sales slump, Pressler made his exit in January. Gap North America President Cynthia Harriss, who trailed Pressler from Disney, resigned last month.
Gap, which announced its sixth straight quarter of declining profit this month, said it would be looking for a CEO who is skilled in apparel merchandising. It won’t be easy, retail experts say.
“It’s going to be really, really hard to find somebody who has the background to run a business as large as the Gap and is also a merchant,” said Kathy Bronstein, former CEO of Wet Seal Inc. in Foothill Ranch.
Although strong merchants are needed at all levels of retailing, the biggest challenge is finding people with the complex set of skills needed to efficiently run a business, spark creativity and unify teams of workers.
If there’s a merchant prince of the moment, it’s probably former Gap CEO Millard “Mickey” Drexler, whom Pressler replaced. Drexler left Gap for J. Crew Group Inc. and revived that apparel chain. Retail experts say he has a feel for merchandise and hires the right people to execute his vision.
Drexler’s not the only standout. Others include Terry Lundgren, CEO of Federated Department Stores, parent of the Macy’s and Bloomingdale’s chains. Lundgren is one of a collection of industry titans who honed their skills in Southern California, once home to an array of department stores.
Lundgren was once general merchandise manager at Bullocks Wilshire. Bloomingdale’s chief, Michael Gould, bought sheets for department store Abraham & Straus before he became senior vice president at Robinsons in Los Angeles 18 years ago.
“All these guys were buyers,” said Ilse Metchek, executive director of the California Fashion Assn. “Only from knowledge of merchandise did you get to be the chairman.”
