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What Can Retailers Learn From the Martha Stewart Flap?

Written by RetailWire Staff

The recent Macy's/J.C. Penney's flap over Martha Stewart Living Omnimedia (MSLO) reminds me of The Celebrity Apprentice — it may be wild, embarrassingly funny, and hugely entertaining (for awhile), but it's no way to run a business.

Among the many questions raised in the tussle: Is Martha Stewart a good business partner? Opinions vary, but there's no argument that she's an icon, having built a media and merchandising empire, and stamping her name on everything from cookbooks and linens, to houses, carpet tiles, wine and frozen food. She also gained a huge amount of press when she spent five months in federal prison as a result of a conviction related to insider trading, and continued to draw tens of millions in compensation while MSLO struggled in recent years.

The current three-way mess centers around whether MSLO had a deal to sell home categories merchandise exclusively in Macy's, or whether the company can get around that by opening separate MSLO boutiques within J. C. Penney. (The terms of the deal allowed MSLO to sell merchandise in their own stores and online.) While the J.C. Penney boutiques are to be staffed by JCP associates, according to JCP CEO Ron Johnson, his company would set prices and promotions and own the goods.

Currently, the three parties are in mediation at the request of the trial's judge. JCP has agreed not to stock the new line of MSLO products, at least until April 8 when the trial may resume if mediation fails. JCP will stock and promote other MSLO products that are non-exclusive to Macy's.

Meanwhile, Mr. Johnson left an e-mail trail showing he was looking to find a way to break the exclusive agreement MSLO had with Macy's. Analyst Walter Loeb, quoted in a recent New York Times article on the trial, said that Mr. Johnson's "naiveté and lack of experience" could cause JCP a self-inflicted "fatal blow." The Times also reported Mr. Johnson as saying at trial that he never read the Macy's - MSLO contract.

The final player in this trio, Terry Lundgren, CEO of Macy's, comes off a bit better as his hanging up on Martha Stewart when she announced the JCP deal is probably considered reasonable by many. And Macy's has performed much better financially than the other two brands in the 'he-said, she-said' debacle.

Three Lessons for Retailers:

  • Think long and hard about the risk-reward relationship before you ink a deal with a celebrity, especially one with an iffy track record.
  • Opening stores within your stores won't typically solve your core business issues anyway.
  • When bringing in an outsider to run your business, make sure he/she has a strong grasp on do's and don'ts in your industry — outsider perspective can be great, but it can be a huge liability as well

 

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