Features, Management

Has the DNA of Retailing Been Compromised?

If you think brick-and-mortar stores are in turmoil because of the internet, you would be wrong. The recent closing of Lord & Taylor’s iconic Fifth Avenue store was not preordained by the impact of e-commerce. The real problem was its ownership. The real-estate investment powerhouse owners had little understanding of the retail industry – in particular what it takes to implement an executive structure to build a profitable retail business. This is surprising since the investors own other well-established international retail brands that are doing well. In my opinion, their  strategy is to purchase retail stores for their real estate locations and the ultimate real estate value of each site. Retailing is just a sideline business.

Thanks to 40-plus years of a successful and privileged retail career, I’ve been fortunate to have worked alongside some of the most amazing merchants and retailers who have built the industry’s impressive reputation. I can state with total confidence that a compromise in the industry’s DNA is precisely what has taken place.

Molecular Breakdown

The molecular structure of creative merchandising has almost completely disintegrated resulting in brick-and-mortar emporiums of stuff housing racks of sameness and markdowns. Even worse, these stores have become reduced to distribution centers for online fulfillment sales.

It is lack of investment in corporate management that is compromising retail — not the amazing opportunity of the advanced technology of today.

The DNA of Retail

What very few understand is that just about every true merchant is an instinctive retailer. But not all retailers are gifted with the DNA of a creative merchant. It’s of utmost importance to ask: What are the credentials the CEO brings to lead a retail business? This is critical regardless whether the enterprise is brick and mortar, online shopping, or direct mail.

A financial or operational CEO charged with the bottom-line results who reports to the investment corporate ownership sounds like good sense, but this person is neither a merchant, nor in touch with the multifaceted needs of the day-to-day merchandising business in the store. What often happens in this circumstance is that the number-two position is relegated to that of a merchant. Few number-twos will take creative risks through merchandising when there is a CEO looking over their shoulders reporting to corporate.

The Creative Merchant

For a retail brand to succeed, the order of management needs to be reversed to what it once was when retailing was an exciting experience for all. Simply stated, a retail CEO must be a creative merchant who establishes the merchandising DNA for everyone within the organization to follow. Simply stated, the brand’s mission statement must articulate this DNA.

History shows why this was so successful. To walk through a Bloomingdale’s, a Macy’s, or a Henri Bendel’s in their heyday was pure merchandising entertainment. We ventured into those stores not because we needed anything. We ventured through their doors to discover originality. Today the experience is to be overpowered by emporiums piled with stuff and markdowns. Being in the company of genuine creative merchants is as exciting as sitting in the front row of a dress rehearsal choreographed by Jerome Robbins. I am blessed to have experienced both.

The New CEO

Here’s my common-sense solution: Partner the creative merchant CEO with a proven and effective financial and operational number-two. In such a strategic partnership, the CEO has a responsible sounding board, and the number-two has a responsibility to support the DNA of the brand. This is the kind of partnership that built some of the best retail brands, which are now finding it difficult to survive. Why? Because the DNA of the brand has been compromised and the creative merchant CEO has been subsumed by the financial and operational CEO.

After tens of millions of dollars of capital investment and, all too often, no instant bottom-line gratification, the investor’s only solution to keep the bottom line out of the red is to sell off the valued properties. Sadly, most non-retail investment management has little understanding that there is no such thing as instant gratification to the bottom line if the brand has lost its way. If the brand still has good enough equity to bring it back, it will take time. It could take the right management three to five years to turn a retail or wholesale brand around depending on a host of considerations.

The Investment CEO

Another significant trend is the selection of important decision-level retail management by the investment group. This practice often results in an unrealistic business strategy. A CEO from the investment side does not possess the merchandising DNA to manage the retail brand. And, if by some munificence of the gods, investors make the proper selection, the CEO is often undermined by the corporate owners who typically feel they have all the answers. Why? Because they own you.

How would today’s investment CEO react to the creative passion and innovations of merchandising icons like Stanley Marcus, Dorothy Shaver, Marvin Traub, Allen Questrom, Geraldine Stutz, Rose Marie Bravo, Josie Natori, Leonard Lauder, Edward S. Finkelstein or Dawn Mello? These visionaries held the number-one position guiding their brands to success through distinction. As CEOs, they are outstanding merchants with a natural talent for team building who built responsible and profitable businesses. They live in their respective markets and on the selling floors of each store with their teams. They did not live in front of a computer 24/7. Each one has the passion and talent that made their respective brands a true success story.

The creative instinct and passion in the DNA of a gifted merchant must be an absolute necessity in the person who becomes the number-one in any successful retail organization. At the end of the day, it always comes down to the right people in the right positions.

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