JC Penney has its old CEO, Mike Ullman, in charge of the company again. Abundant sales and coupons have returned, as have brands that disappeared for a spell. In many ways, the JC Penney of old is back. Whether this is a good thing for the company remains to be seen. About month ago, within days of Ron Johnson being fired as CEO and Mike Ullman retaking his former position at the helm of JC Penney, Ullman quoted in the Wall Street Journal saying that there were no plans to bring back the old JC Penney. “I wouldn’t recommend that we go back to the way J.C. Penney was when I left,” he said. “Things change.” Still, JC Penney has essentially done a huge about-face in recent weeks, and it’s understandable why: The short-lived Johnson era, with its no-coupons stand and new focus on hip boutique brands, alienated customers and damaged sales badly. For the three-month span ending May 4, JC Penney reportedly lost $289 million, with sales decreasing 16.4% compared to a year ago — which was itself an awful period for the retailer. To bring back customers, JC Penney has been bringing back its traditional, pre-Johnson pricing and discount strategies. This week, jcpenney.com was littered with old-school discounts—for instance, 50% to 60% off patio furniture, and 30% to 40% off clothing with the St. John’s Bay label, the retailer’s exclusive brand that disappeared during the Johnson era and was brought back in March. (MORE: Splurge Surge! Luxury Spending on the Rise) Of course, there are those who view such discounts are straight-up frauds, based on artificially inflated list prices. Johnson himself would be in this camp. In January 2012, Johnson, the retail superstar who had helped turn Target and the Apple Store into huge success stories, promised to get rid of such “fake” prices and summarily slashed original prices by 40% or more. Shoppers weren’t crazy about the newly cheap list prices—because their arrival prompted the end of sales and coupons—and so in recent weeks the retailer has
Tag Archives: Future of Retail
The Hot New Online Retail Strategy: Pushing More In-Store Purchases
You’d think that when retailers enhance their online shopping options, the goal would be increased online sales. Not so with Target, Gap and Rite Aid — which are adding new online tools with the hopes of boosting in-store sales. During the recent winter-holiday shopping season, retailers like Kohl’s, JCPenney and Sears were actively blurring the lines of online/off-line shopping with a mix of promotions — some meant to entice in-store shoppers to visit the store website, others intended to attract Web shoppers into physical stores. The offers represent the latest example of how we are living in an omnichannel “bricks and clicks” retail world, where shoppers are comfortable hunting for deals and making purchases in virtually every manner possible — and where retailers are therefore trying to reach shoppers everywhere they’re willing to spend. Even so, while retailers aren’t going to turn away online sales, it’s clear that they prefer shoppers to be walking among the aisles of tempting merchandise inside physical stores. Why? It’s assumed that consumers who make the effort to visit real-life stores are more serious about their intent to spend. The online experience is perfectly suited for quick, easy browsing. But all too often, the browsing doesn’t translate into actual purchases — hence the better-than-average chance of so-called shopping-cart abandonment. There are plenty of looky-loos in real-world stores as well, but the need for immediate gratification, and the way that holding an item, seeing it in person, or trying it on can push a shopper over the edge with desire, means that the in-store shopper is generally quicker to pull the trigger on purchases than his online counterpart. (MORE: Is Retail Therapy for Real? 5 Ways Shopping Is Actually Good for You) There’s also the impulse-purchase factor: consumers are more likely to make unplanned purchases in actual stores. According to a survey conducted last year by Dimensional Research and Wanderful Media, 65% of consumers who use their mobile devices to shop had made an impulse purchase online during the previous month, compared with 74% who had made
Forget ‘Buy American’? U.S. Retailers Push an ‘Imports Work’ Campaign
Wanna support American workers? Buy imports. So says a new report, which claims that a cheap, robust imports marketplace not only helps American workers and families, but local farmers, manufacturers, and small businesses as well. You may not have noticed, but last week was promoted as something called “Imports Work Week.” The celebrate the importance of imports in the U.S., a group of business associations led by the National Retail Federation (NRF) has released a study showing the many ways that imports benefit American consumers and businesses alike. Cheaper prices are the most obvious benefit. “In the past decade, the price of television sets sold in the United States has dropped 87 percent. Computers have gone down 75 percent, toys 43 percent and dishes and flatware by a third,” the NRF’s Jon Gold explains in a blog post. “Why? The answer is easy – imports.” (MORE: Bangladesh Factory Collapse: Is There Blood on Your Shirt?) But the benefits don’t stop there, according to the study, which runs down how imports also help farmers, mom-and-pop businesses, working-class Americans, and even U.S. manufacturers. Here are a few of the groups that should love what imports do for them, per the report: • Imports improve American families’ standard of living. They help families make ends meet by ensuring a wide selection of budget-friendly goods, like electronics we use to communicate and many clothes and shoes we wear, and improve the year-round supply of such staples as fresh fruits and vegetables. • Imports support more than 16 million American jobs. A large number of these import-related jobs are union jobs, held by minorities and women, and are located across the United States. • More than half the firms involved in direct importing are small businesses, employing fewer than 50 workers. • American manufacturers and farmers rely on imports including raw materials and intermediate goods to lower their production costs and stay competitive in domestic and international markets. Factories and farms purchase more than 60 percent of U.S. imports. (MORE: Patriotic Consumer’s Dilemma: Hard to
Video: Sorry eBay — Turns Out Some Small Businesses Support the Marketplace Fairness Act
Online giant eBay is leading the charge against legislation that would require sales tax to be collected on Internet sales. The mandate would be an unfair burden on small businesses, eBay says. And yet who are among the bill’s strongest supporters? Yep, small businesses. For years, online sellers have benefitted from what brick-and-mortar retailers call the “internet sales tax loophole.” For the most part, e-retailers are only required to charge customers sales tax if the vendor has a physical presence in the state where the purchase is being made. Consumers are supposed to pay the appropriate sales tax when they file their annual federal and state income taxes, but almost no one does. The situation gives e-commerce businesses an obvious pricing advantage over brick-and-mortar stores and online retailers with a physical presence in the state, which must always tack on sales tax. The Marketplace Fairness Act, which passed in the U.S. Senate and is now being considered in the House, would close this loophole. The legislation would allow states to require out-of-state vendors to collect all the same sales taxes that are currently assessed in physical stores at the customer’s location. (MORE: 5 Ways to Save Money Shopping Online, Regardless of New Internet Sales Tax Legislation) Amazon, the world’s largest e-retailer, has voiced support for online sales tax collection initiatives in recent years. The only big company that’s actively fighting the legislation today is eBay. Company CEO John Donahoe was quoted on NPR this week arguing that the law would hurt small businesses: If it’s allowed to play out things will still sell in eBay marketplace, but it will be larger and larger sellers that are doing the selling and the small guy will, over time, slowly be squeezed out. Currently, the Marketplace Fairness Act would exempt retailers with less than $1 million in annual revenues. Instead, eBay wants the exemption pushed to the $10 million revenue mark, which Donahoe pointed to as one of the criteria used in Obamacare to define a small business. “All we’re saying is an
Overdoing ‘Efficiency’: When Businesses Discover They Can’t Keep Downsizing the Workforce
One national restaurant chain realizes that over-burdening its employees hurts sales, as well as the company brand. Will more businesses follow its lead? In the business world, efficiency is king. The corporate quest to cut salaries and get more out of employees, thereby maximizing profits, is never-ending. At some point, however, increasing the workload on employees backfires. The burden becomes too much for workers to bear, and when employees are overwhelmed and can’t keep up with their duties, it’s just plain bad for business. Last week, Red Lobster basically admitted that it had crossed the line with the introduction of a policy aimed at increasing efficiency and lowering restaurant costs. In July 2012, the restaurant chain, owned by Orlando-based Darden Restaurants, eliminated the busboy position, demoted many waiters to lower-paid status as “service assistants,” and forced the remaining full-fledged servers to increase the number of tables they handled from three to four. At the time, Red Lobster said that the changes were being made after testing showed that diners and restaurant employees alike approved of the new policies. An Orlando Sentinel story published at the time of the switch offered some other perspectives: “We’re going to be completely worn out,” said Bob Meehan, a longtime server at Red Lobster in Lake Worth. “It’s definitely going to hurt service.” Chris Muller, dean of Boston University’s hospitality school, said worker morale will likely suffer. “If you don’t like the people you’re working with and for … it’s going to show,” he said. (MORE: Why Restaurants Have Been Holding Back on Hiking Menu Prices) Lo and behold, it appears as if Red Lobster is now acknowledging that these critics may have been on to something. Less than a year after the four-table policy was launched, the company announced it is reversing the decision, and waitstaff will go back to serving three tables at a time. A Red Lobster spokesperson told the Orlando Sentinel that while some customers liked the four-tables policy, once it was introduced around the country, “far more folks told us
Social Media Manipulation? When “Indie” Bloggers and Businesses Get Cozy
Brands have sought to partner with influential bloggers for nearly as long as there have been blogs, with ads, sponsored posts, and more. Lately, however, a new relationship between brands and popular social media practioners is emerging: It’s not a traditional endorsement deal, and yet an “independent” endorsement for the brand is all but guaranteed. So how exactly does that work? Well, for the companies involved, there is a simple two-step approach to establishing such relationships: 1) Locate people who love your brand and hold influence in the social media world; and 2) give these people even more reason to love your brand, so that they’ll use their influence to somehow help promote that brand. Chipotle is following such a strategy by giving free burritos for life to pro athletes. Free burrito cards aren’t being handed out willy-nilly to every well-known athlete, of course. Instead, the criterion is pretty obvious: The freebies are given to athletes who have already stated publicly (via Twitter, most likely) that they love Chipotle. [CLARIFICATION: A firm representing Chipotle reached out and clarified that these cards don't guarantee free burritos for life. Instead, cardholders get one free burrito per day for one year, with the opportunity to renew when the 12-month period is over.] The fast-casual chain is banking on the strong likelihood that if these athletes are munching on its burritos for free regularly, they’ll plug the brand occasionally. The athletes aren’t official spokespeople and aren’t featured in company ads. But in essence, they are endorsing Chipotle, and they’re being “paid” for their endorsement in the form of free burritos. (MORE: Stealth Celebrity Endorsement: No Money Changing Hands, Just Free Burritos) Popular bloggers, on the other hand, often agree to relationships with brands that might include official sponsorships, invitations to focus groups on products in the works, or special perks such as freebies or sneak peeks at merchandise before it’s in stores. In 2009, the FTC released guidelines that require full disclosure of “material connections”—sponsorships, free products and perks, and any money changing hands
Tale of Two Supermarkets: Why Fresh & Easy Flopped and Fairway Flies High
This week, the death of one high-profile grocery chain, and the ascendancy of another, tells us a lot about what Americans want in a supermarket—and what we’re just not buying. On Wednesday, Fairway, the beloved New York-centric supermarket chain, went public, and shares of the company quickly shot up 39%. Born as a produce stand on Manhattan’s Upper West Side, Fairway now has a dozen locations, and it plans on opening as many as 300 stores around the country. Also on Wednesday, news spread that Fresh & Easy, the supermarket brand launched in the U.S. five years ago by Tesco, Britain’s biggest grocery company, was officially a failure. Tesco announced it would cut its losses on Fresh & Easy, taking a write-off of roughly $1.8 billion. The 200 existing Fresh & Easy stores, all in the American West, are up for sale. Most would agree with Philip Lempert, editor of Supermarket Guru, who said in a phone interview, “Tesco is one of the smartest retailers on the planet. They’re not a dumb company at all.” And yet, as Burt Flickinger III of the retail consulting firm Strategic Resource Group put it in a Los Angeles Times article, “Tesco’s failure will rank as one of the biggest among food retailers in modern supermarket history.” (MORE: The 5 Big Mistakes That Led to Ron Johnson’s Ouster at JC Penney) What happened? And what has Fairway done differently that has it headed in exactly the opposite direction of Fresh & Easy? While both are in the same business, Lempert said, “They really represent the two extremes of what’s going on in grocery retail.” Here are a few of areas where the differences are readily apparent. Understanding Customers & Locations The first Fresh & Easy opened in the U.S. in 2007. Tesco originally planned on having 200 stores by the end of 2009, and upwards of 400 locations by early 2013. Instead, by the fall of 2010, when the total stood at 168 U.S. locations, the company announced it was “mothballing” 13 stores, including
Attention JC Penney Shoppers, Look Out for the Return of ‘Sales Galore’
After months of abysmal sales tallies, the Ron Johnson era is over at JC Penney. Now that Johnson’s “fair and square” no-coupons pricing policies have proved to be a failure, the department store will have to try something else to win back customers and stop the bleeding. But what? Mike Ullman, who was replaced as CEO when Johnson took over at JC Penney in 2011, and who began serving again as top executive when Johnson was pushed out, told the Wall Street Journal that he wasn’t planning on reverting to the old business model. “I wouldn’t recommend that we go back to the way J.C. Penney was when I left,” he said. “Things change.” And yet, in some ways the department store is clearly trying to resemble the JC Penney of old. Management has already announced that newspaper ads will feature coupons once again. Johnson seemed to find coupon usage distasteful and silly, likening it to a drug that consumers needed to be weaned off. A little over a year after JC Penney went “drug-free,” so to speak, coupons are back. (MORE: The 5 Big Mistakes That Led to Ron Johnson’s Ouster at JC Penney) Some retail experts think that the return of coupons is just the tip of the iceberg. John Sculley, former CEO of Apple, said on Bloomberg TV that it was absolutely essential for JC Penney to “get the cash flow of those old customers back into the store. And how did they do it before?” Sculley asked, before answering his own question. “They did it with sales.” A new study indicates that JC Penney’s shoppers are older, poorer, and more price-sensitive than the average customer at, say, Target or Macy’s. It’s assumed that an announcement of major markdowns is the quickest (and perhaps only) strategy to bring these customers back to JC Penney. Martin Sneider, a retail professor at Washington University, told the St. Louis Post-Dispatch that he anticipates a flood of deals and discounts, at least in the short run while JC Penney is desperate