Gear changes in the road race of retailing

Retailing is a fast-paced, day-to-day business; a very different environment to the longer time frames enjoyed in manufacturing and distribution.

Grocery retailing can be considered to be the F1 or Indy of retailing because it combines the sales of all of its suppliers’ products. Rain, snow, a catalogue drop or an offer-driven television commercial all increase or decrease footfall and sales in very short order.

Shoppers are in a grocery store on average two to three times a week buying lots of small, low priced items, so turnover is high and so is demand. As you move from grocery through to mass merchant discount department stores like Target, Kmart and Walmart – which I refer to as the V8 Super Cars or NASCAR of retailing – the pace slows a little as shoppers visit less frequently and individual item purchase prices rise.

In mainstream branded department stores like Myer and Nordstrom – the Porsche and Ferrari sports car racing of retailing – the pace slows a little further as infrequent but high value luxury items are purchased. Whilst you might be thinking that these analogies are a little poetic, if you look at the sponsorship deals for each of these sports you will see the alignment.

Consumer packaged good (CPG) brands like Red Bull sponsor the F1, Target and Kmart sponsor V8 Super Cars and NASCAR, and luxury brands like Tag Heuer, which are sold in department stores, sponsor teams in sports car racing.

So, with that in mind, what a week of fast gear changes we have seen around the world in retail racing – I mean, trading.

In the US, Ron Johnson, the man who built Apple’s world class retail offering, left mass merchant/discount department store JC Penney (JCP) after a little more than a year. He was replaced by his predecessor at JCP, Myron Ullman.

In Australia, Dene Rogers left Target to be replaced by veteran retailer and Coles operations director Stuart Machin.

And Tesco, one of the largest and most respected grocery chains in the world, looks to be finally exiting the US after five years of trying to build a profitable base in the country’s huge grocery sector with its Fresh & Easy concept. This follows the fact that Tesco continues to lose UK market share to Sainsbury’s and the announcement of its first profit fall in 20 years

That’s a lot of change in one week across three continents.

Well-run retailers tend to move quickly. Their boards and shareholders are very involved in the business, they understand retailing’s fast-paced nature and appreciate that if a CEO hasn’t made a difference in one trading cycle then it’s unlikely they will in two.

If you look at the turnaround in Australia of Coles and Kmart, as well as growth in Super Retail and Kathmandu, all four brands have had CEOs and management teams that have acted quickly. As management writer and organisational change guru Peter Drucker once famously wrote, “Strategy is a commodity. Implementation is an art.”

And most successful CEOs are high on energy and good communicators, but short on patience. Great people to invest in, not always the best people to live with! Apparently…

I’m truly surprised that Ron Johnson didn’t make a greater impact on JCP. I walked their test stores in Dallas in the run-up to the US holiday season last year and liked the experience. Still, if the sales dial wasn’t moving very fast then the majority of shoppers weren’t convinced.

The same was true with Target in Australia and Tesco’s Fresh & Easy stores in the US.
However, unlike car manufacturers, a retailer has never asked a government for subsidies to underwrite its poor performance.

CROSSMARK CEO Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. His international career in sales and marketing has seen him responsible for businesses in over 40 countries.