BrainTrust Query: I Found One
Commentary by Bill
Emerson, President, Emerson Advisors
In a recent
post, I asked the question, “Where
are the Merchants?” I am happy to
report that I found one. He is Hans Sternberg, scion of a family that started
a small shop in Germany in the 18th century, fled the Nazis in the 1930’s,
and went on to build the largest family-owned department store in the country
– Goudchaux’s/Maison Blanche, a legend on the Gulf Coast.
Hans has brilliantly
recounted this experience in a new book, “We Were Merchants.”
In the introduction,
he writes, “This book is therefore dedicated to an era when the department
store was part of the family, when youthful faces pressed against display
windows signaled the Christmas season had arrived, when someone actually
measured your foot and helped you select the perfect new shoes, when someone
getting a makeover in cosmetics could transfix onlookers, when a visit
to the toy department was mandatory if children were tagging along. It
was a period when browsers and buyers alike were greeted and remembered,
when they were treated like visiting royalty.”
I had the opportunity
to speak to Hans at length recently. Here are his views on the key
elements of retail success and its current state:
- Leadership and innovation: Hans believes this is critical to success.
You have to give the customer a reason to pick your store over your competitor
and that comes from leadership and relentless innovation. He sees
little of this today, with mostly followers and very few leaders. - Understanding your customer: Hans feels this is another critical
element. In his view, the best merchants are those who spend as
much time as feasible in the stores listening to their customers, understanding
what they like/dislike, and what they are looking for. He worries
that the consolidation of so many retailers hinders this understanding,
with corporate offices separate from the stores and merchants that rarely
interact with customers. - Building an exciting, memorable experience: Hans
believes that the in-store experience – visual, service levels, and displays
– are a key differentiator, regardless of what business you’re in. He
does admire some retailers, but finds them only at the high end of the
price spectrum. - Communicating your story: Hans’ axiom is that “you need to
advertise in good times, you MUST advertise in bad times.” He does
recognize that this is much more complicated today with the explosion
of channels. He wryly adds that adaptation is another important
element of success.
Discussion
Questions: How do the merchandising skills of the department stores
of yore translate to modern-day retailing? What adjustments must be made?
It is all still very relevant, although today we have technology and business intelligence to provide a lot of data and enhance this goal. Leadership and vision are still very important; using those to enhance the new era’s experience and customer service adds to that mission. For instance, it is unacceptable to consumers today to stand in line in a disorganized, non customer-focused way. If retailers want to start their year off right, they should review all software, technology, and programs that enhance these 4 major goals.
For instance, recently I was in a major retailer where the POS software was so slow it took an unbelievable amount of minutes to process customers. Many in line just left their buggies full of merchandise to exit the store. This company–who has a big marketing campaign–is not focusing in the right area. If you bring them into the store but can’t service them, all those marketing dollars went down the drain!
What a great story.
I agree with all the points Mr. Sternberg made but unfortunately, we have a very different retail landscape today. It’s far more polarized and therefore, as he points out, great visual merchandising has become the realm of the luxury store.
Today, we have retailers that trade on price/convenience and those that offer store experience/service…there’s very little left in the middle and what is, tends to struggle. Making it even tougher is the fact that the same consumer is trading up and down between propositions all the time.
I think the key point is that regardless of which end of the spectrum you’re on, you’d better “know your customer” and why they are coming to you in the first place. Then be relentless in delivering that every day.
These points that Mr. Sternberg mentions translate very well into modern department store operations. The problem is that they haven’t been utilized and department stores essentially killed the department store model. Instead of rosy cheeked youths staring at the toy displays in the windows, you have disgruntled associates meandering around the store like zombies looking the other way when help is needed. Instead of a friendly gal at the makeup counter ready to give you suggestions for a gift for your wife, you have a snot-nosed teenager texting her friend who won’t even take the energy to lift her head and acknowledge your existence. And how did we get to this? Not by Mr. Sternberg’s hand, that’s for sure.
I enjoyed reading about Mr. Sternberg, both in the Wall Street Journal review of his book and in Bill Emerson’s profile. Everything that Mr. Sternberg discusses–being customer-centric, creating a satisfying in-store experience, and so on–is just as valid today as 100 years ago. The trick is to maintain these standards in the face of changing competitive threats, new technologies and national operating scale.
With regard to new technology, whether it’s intended to help run the business or help market the company, Mr. Sternberg’s goals ought to be benchmarks for effective systems development. If IT management leads to “analysis paralysis” or a failure of customer satisfaction, it’s time to go back to the drawing board.
The in-store experience is the most underrated aspect of successful merchandising. In this day and age of SKU rationalization, restraint of corrugate displays, slogans such as “We’ll simply be lazy and match all competitors’ prices,” with all “me-too” logos, signs, and walls, etc, the in-store experience has become generic and very vanilla.
Retailers need to stop over-rationalizing and start thinking like merchandisers. The consumer is dying for an exciting and surprising shopping experience.
It’s hard to question Mr. Sternberg’s ideas, mainly because they are fairly safe. Many of today’s department store operators are relics or derivatives of the past and that’s part of the problem. They’ve cut, pasted, tacked on and dabbled their way into borderline irrelevance and as a result, retail finds itself out of step with the culture.
I don’t advocate a return to the days of yesteryear; instead, I’m excited about the possibility of a new generation of retail leadership. Based on many conversations that I’ve had with retail students, a fount of new ideas, unburdened by sentimental references to the past (though by no means disrespectful to it), is ready to give it a go. Bring on the snotty-nosed kids, I say!
I love the story but would like to put a different twist on it. Take the focus off the customer and put it on the employee.
Leadership and innovation: Hans believes this is critical to success. You have to give your employees good reason to pick your store over your competitor as a place to work and that comes from leadership and relentless innovation.
Understanding your employees: The best merchants are those who spend as much time as feasible in the stores, listening to their customers and employees, understanding what they like/dislike, and what they would to do improve the experience and work environment. So many retailers hinder this understanding, with corporate offices separate from the stores and merchants who rarely interact with customers and front-line employees.
Building an exciting, memorable experience–that is not only done with display but more importantly, with the level of service. Service is a key differentiator, regardless of what business you’re in. Most retailers talk the talk but do not walk the walk, no matter what the price level.
Communicating your story: If you can’t sell it on the inside you won’t be able to sell it on the outside.
Mr. Sternberg’s ideas are alive and well–in small businesses. There are countless small retailers who enjoy a fanatical following and strong sales because they know their customer base, and how to appeal to it. Congratulations, small guys; you make life a little brighter for us.
I’m an advocate of “Knowing the Customer.” Small businesses seem to understand this point intuitively, and in practice and out of necessity. Unfortunately, department stores have lost their way in this regard.
I grew up in a town (Chicago), that had 7 department stores in the ’40s and ’50s, and I’d swear that they truly did understand their customers and react to their needs, dealing with consumers in an individualize manner. Today, even the grand lady, Marshall Field’s, is gone. How to resurrect the channel? Smart minds need to be put into play. Fortunately, their are a great number of them available.
Thus, the leadership and innovation theme has the largest upside impact for department stores. Today, those same department stores have to demonstrate that they are committed to developing those leaders, and that they have a belief that innovation can, and does, happen throughout their organizations. Tough challenge for them, but it is the key to their future. Those true leaders will innovate, and make certain that their charges UNDERSTAND THE CUSTOMER.
I think Doug Stephens makes a very good point. The business model that Mr. Sternberg’s business was built on is very different from the dominant business model of today. Store experience and service long ago gave way to price and convenience as the primary driver of the retail industry. In category after category, and segment after segment, merchandise that once might be thought of as fresh and unique has largely been reduced to low-priced commodities.
On the one hand, that makes Mr. Sternberg’s book largely nostalgic. In the race to the bottom, most major chains only pay lip service to customer experience.
On the other hand, there is a lot for growth-minded independent retailers to learn from Mr. Sternberg. These retailers don’t pretend to compete head-to-head with the national chains. Their business models are built around customer experience and service, as well as unique and compelling assortments.
These retailers may never approach the size and scale of the behemoths (to do so would require adopting a price/convenience/volume business model!), but if you’re looking for some of today’s very best merchants, this is where you’ll find them.
Having grown up in New Orleans and spent time in Baton Rouge, it’s nice to see the story of Mr. Sternberg and his company, which in its heyday was absolutely the best retailer in the area.
It’s not surprising to see some people questioning the relevance of Mr. Sternberg’s ideas, and that is one of the fundamental problems with retail today. People want to reach for mass but can’t serve the individual customers. Look at where Macy’s ended up (i.e., as part of Federated) and it’s very clear that excessive leverage and greed were too much for many merchants.
Yes price is important but not more than value and for some smart merchants, and discerning customers, there is a market opportunity that is NOT predicated on price and lowest-common-denominator retail. All it takes is the right leadership, capital base and strategies and the discipline to commit to them.
All of these principles hold good in today’s world, but changing times, scales, and technology have given it a different perspective. Talking about innovation, today, most successful retailers are constantly innovating, be it new faster ways of checkout–Apple iPOS, new business models–Games Exchange by Best Buy, Amazon platform, in-store experience–metro future stores…and the list goes on. The fact is that all are based on the same basic principles of better customer service and in-store experience.
With most retailers crossing the thousand mark in number of stores, it’s difficult to know each customer personally. That’s where customer analytics and loyalty programs come in–Canadian Tire being a perfect example of an old-school retailer adapting to modern ways with the best in class loyalty program.
With advertising, typically a sales dip hits the advertising budget and finding a correct balance between advertising too little and too much has been a holy grail . I believe that apart from these principles, the ability to adapt to the changing environment is the key to success for any retailer.
Understanding customers, particularly Best Customers, is a critical part of retail marketing that I often find overlooked by merchants. Much of the time, I find them selecting products and advocating for marketing strategies to target people like themselves, when customer behavior has “moved on” some time ago.
People are more time-challenged, more scared of the economy, more fragmented in family relationships and more digital than ever before. Merchants who want to market to an old-fashioned customer in an old-fashioned way will find themselves outmoded and outflanked by competition. In addition, the brand runs the risk of being viewed as “out of touch” with their customers. And “out of touch” means “out of mind” which translated to out of the pocketbook. Which, by the way, also means…out of business.