What do you have when you’re a retailer that didn’t really know who its customers were? That had confusing, difficult-to-navigate stores…and too many of them…and in the wrong places? And that had abandoned its online efforts for several years just as every other sane retailer was embracing e-commerce? Well, you’d pretty much have Pier 1.
After reporting yet another disappointing financial quarter – sales down, comps down, margins down, profits down – the company announced a major new initiative to turn things around.
As these things go, it had all the prerequisite pieces:
- A catchy name: “Pier 1 2021: A New Day”
- A timetable – three years — just long enough to manage short-term expectations yet still far enough out there to give space for revisions, rethinks and redos.
- All the magic buzzwords about distinctive product offerings, store resets, new technologies and omnichannel wonderfulness.
If you’re saying to yourself, “Haven’t I heard this before?” you’re not wrong. There’s another home furnishings retailer at the other end of the strip mall that also has had deteriorating financial results while touting its own turnaround program with many of the same initiatives. Its name is Bed Bath & Beyond. That both stores are finding the going tough these days has to be put in the context of the overall home furnishings business. You know, the one where the housing market is rebounding nicely and millennials are starting to enter the prime household formation stages of their lives, the time that the next-gen buys the kinds of things it takes to set up a new household. The kinds of things that Pier 1 and BBB both sell.
Out to Sea
The Pier 1 saga is particularly foreboding. It has been out there in the wilderness for the better part of a decade, changing management, changing direction and yet not changing much of anything. In fact, the most decisive move prior management made was to shut down the company’s online business at one point. There was never a real clear explanation why, other than that they wanted to focus on fixing the physical stores first. The stores pretty much stayed the same while competitors built up their e-commerce business.
Speaking of competitors, Pier 1’s current CEO Alasdair James – on the job for a year now after coming over from, ahem, Sears — in announcing the new turnaround strategy actually had the courage to tell the world the store didn’t really know who its customer was. It had been operating under the impression that its competitors were stores like Williams Sonoma, Pottery Barn and Crate & Barrel. Turns out, he said, citing some new research, that it’s none of that above. Its customers see stores like At Home, Cost Plus World Market and Home Goods as its main competition. Target too.
Has management ever visited any of these stores? A quick trip to the strip mall would show in about two seconds that Pottery Barn and Crate are several steps above Pier 1 in design, quality and pricing. The second group of stores mentioned are much more similar in their offerings. This isn’t rocket science. It’s not even retail science. If James and his management actually went into their own stores, they would not only get claustrophobia but a very real sense that they are overcrowded, oddly assorted and exceedingly difficult to shop. Forget about the treasure hunt school of merchandising, this is more like the buried treasure hunt. But they commissioned research nonetheless to report the obvious.
Pier 1’s new plan is focused on fixing all of these shortcomings while bringing the chain up to working speed on using technology, empowering floor sales people and shortening the product development cycle. All of which are good things that it should be doing. And that it’s very hard to believe were neither understood nor being addressed previously.
Pier 1 operates about 1,000 stores in North America and like the rest of the retailing world, it will have to get that store count down, perhaps substantially. It gets about a quarter of its sales online and like the rest of the retailing world it will have to get that share up, perhaps to as much as half of its business. And like the rest of the retailing world it will have to update its approach to merchandising to address a new generation of shoppers instead of whoever it is it thinks it is reaching. The difference is that the rest of the retailing world has understood this for quite some time. Pier 1 has just figured it out.
Warren Shoulberg is a business journalist who reports on the home furnishings market. He fondly remembers shopping at Pier 1…a long time ago.