Comments on: Different Cliffs, Different Bottoms, Different Parachutes

By: SamChevre

SamChevre — Mon, 23 Feb 2009 16:35:38 +0000

But, on the other hand, almost any commodity potentially could be sold by people who know it well and know something about the end users.

That was the pre-Nardelli Home Depot model. Most of the floor workers were semi-retired tradesmen–so if you went to the plumbing section, the guy to talk to was a 60-year-old with bad knees who’d been a plumber for 40 years.

Why anyone thought this model could be improved is beyond me.

By: Arashinomoui

Arashinomoui — Sun, 15 Feb 2009 15:27:41 +0000

Interesting thoughts, especially as I’m about shoulder deep in a marketing case analysis for Sear Canada. As much as I want to rail against the acceptance of Wal-Mart marketing tactics, as far as it goes within the Canadian market for department stores, Wal-Mart has forced out all but Sears Canada and Hudson Bay Company since it entered the market in 1994. The discounter market is huge and monolithic, and due to the growing wealth disparity, the options aimed at the middle-income customer are folding because price and convenience are such a huge factors.

Which also answers why there are so many Wal-Marts and Starbucks, someone looked at the polling and market data and saw that the two key factors for most market segments that Wal-Mart is concerned with is convenience of location and price. Quality and service rank a distance 3rd and 4th, if I recall the article correctly.

By: Doug

Doug — Fri, 13 Feb 2009 07:29:01 +0000

I was trying to remember whether it was Circuit City or Best Buy that did the big layoff thing. Thanks dmerkow! That’s the point where it would have been good to hang a few MBAs, pour encourager les autres.

The deeper challenges are all there, too. Even 15 years ago, when I was in the business, bigger book chains could profitably sell certain books for less than what independents had to pay for them wholesale. There was some kind of class action suit by the independents, but it didn’t go anywhere. Now that Amazon has been doing to the chain superstores what they did to the independents long ago, it’s hard to see where things go next.

And of course giving more power to people closer to the customers means that people higher up in the hierarchy will be giving up power. Long odds, I would think.

By: dmerkow

dmerkow — Fri, 13 Feb 2009 03:45:48 +0000

Great discussion of the retail situation. The irony with Circuit City of course is that they fired all their well-paid tech geeks about 3 years ago, because it supposedly cost them too much money. Instead they shifted to the Walmart model of low cost, low quality help. They also made a big mistake in abandoning white goods about 5 years ago.
One of the challenges with moving to a better kind of retail is that it became the great vacuum cleaner of employment for folks between jobs, those lacking skills for regular work, those laid from manufacturing jobs, and those with a need for income without serious time or intellectual commitment – I’m thinking of here of students of all ages – high school up through grad school.
I’d add that the lose of the owners of smaller retail establishments has done real damage to the American middle class. Running a small retail business was a good way to be an entrepreneur for centuries basically and that all started to disappear with a vengeance in the 60s.
Supposedly Macy’s is going to try a variation on letting folks closer to the store floor choose the merchandise. I speak from a couple years at Macy’s, siblings at OfficeMax, Circuit City, JoAnn Fabrics among others.

By: Timothy Burke

Timothy Burke — Thu, 12 Feb 2009 20:33:50 +0000

Important point. But, on the other hand, almost any commodity potentially could be sold by people who know it well and know something about the end users. Another business that I think has mostly done a good job of creating a sales culture that works, for example, is Trader Joe’s. In fact, Trader Joe’s is really interesting because seems to have handled its nationwide expansion surprisingly well in many respects. Generally it has a smallish footprint, very carefully selected stock, good pricing for good quality, and the staff usually know quite a lot about what’s in the store and seem generally pretty happy to be working there. I’m sure some of that is showmanship, but still, it’s a model to look at.

By: Bill McNeill

Bill McNeill — Thu, 12 Feb 2009 19:48:47 +0000

One nit with AndrewSshi’s last comment: the three retail models you mention–bookstores, college student hangout coffee shops, and record stores–are all shops that convey social cachet to the staff. You’re willing to work for peanuts at the local record store because that’s what the cool kids do. This won’t scale to selling TVs and lawnmowers.

By: Timothy Burke

Timothy Burke — Thu, 12 Feb 2009 16:18:36 +0000

Right. The supply chain thing is big. Look at what’s happening to *anyone* who makes peanut butter now. You can’t even say, “Well, we’ve got a good-quality supply chain, even if everyone else is Wal-Mart all the way”, because catastrophic failures are going to affect your sales as well. This is where the phobia about regulation has turned around to bite business itself in the ass: production standards that are not merely voluntary are a tide that floats all boats, if they’re done properly.

I don’t care for Starbucks’ coffee, but I would say that they do a good job nurturing a welcoming environment in quite a few of their branches–pleasant employees, etc. At least some of that probably comes from compensation and benefits, not just training. A place like Best Buy would be a lot better off if it concentrated heavily on hiring people who really know their tech or their product and who have some good social skills and then paying them accordingly, as valuable employees, maybe reducing floor staff if necessary. Better to have fewer better people and make their jobs something they’d like to keep in the longer haul.

Another thought: start distributing some of the managerial decisions–for example, if you build a highly-trained, well-motivated sales force, start giving them a bigger say over what gets stocked on the floor–figure out a way to pool collective knowledge inside the company’s sales staff about product, encourage them to develop knowledge about what’s coming, build their relationships as sales staff to suppliers. Try to thin out the middle of the company as much as possible, cut the layers between senior management and sales staff. The more responsibility and autonomy that retail staff on the ground have, the more stake they’ll have in the company’s business over the long haul–if they’re appropriately compensated and rewarded for that. But this won’t work if it’s just B-school middle management voodoo bullshit, if it’s just p.r. covering up a reality that sales staff are treated as disposable units, or if the people who get a managerial responsibility are the drones rather than the folks who really know what the product is and how to sell it.

By: AndrewSshi

AndrewSshi — Thu, 12 Feb 2009 15:58:54 +0000

I have a couple of more thoughts to add on this. First off, none of this is good news for the PRC.

More importantly, I think that there are some models for what you envision in retail staff. If you look at bookstores, college student hangout coffee shops, and record stores (at least up until a few years ago when people quit paying for music), in all three instances you have (had in the case of the last) retail jobs that pay peanuts, but for which competition is extremely fierce. As a result, the staff is far more engaged than in something like a big-box store. Of course this is possible partially because many of these jobs are worked by people who can draw on the Bank of Parents and don’t really *need* the money. So its hard to scale that model up.

One possible way to scale this model up would be to have retails jobs outside of management be seen as something more than “holding pattern” jobs. That could possibly be done by increasing pay (say, starting staff out at eleven-ish dollars an hour and having regular raises), but then such an increase would put a *lot* of pressure on payroll.

I think that the retailers who are best poised move to a better model would be stores like Best Buy, since you at least remember them having a not-sucking moment. After all, there are a lot of electronics enthusiasts out there–if you paid them more than most retail employees and gave them the chance to be able to get employee discounts on their techno-toys, you’d have a dream sales force.

Again, I think a lot of the issues with employees is that it’s just hard to get really motivated staff when a retail job is usually seen as a stepping-stone to a “real job.”

And I kind of agree with everything you said about supply chains.

By: Timothy Burke

Timothy Burke — Thu, 12 Feb 2009 15:18:58 +0000

I think that’s absolutely right: nobody had to build a better way to retail because the money kept rolling in even if you were selling low-quality merchandise in giant indifferently organized warehouses with a badly-paid and poorly-trained sales staff. But it doesn’t matter what happens next: I don’t think consumers are going to go back to whipping out the plastic with abandon and ignoring how dysfunctional most retail has become.

By: fridaykr

fridaykr — Thu, 12 Feb 2009 14:55:59 +0000

Nice summary of contemporary retail failures. However, I
I think that the retail trends you identify are inextricably tied to many factors, including the rampant leveraging, both individual and commercial. At the risk of simplifying, easy credit insulated retailers, for a time anyway, from the consequences of their poor strategies. Now it looks as though it is time for some businesses to fail.