Kicking the habit
January 8, 2001,
The wonderful thing about January is that we are all compelled to wrestle with our bad habits, and if we're truly resolute, we may ultimately extinguish them.
Bad habit no. 1: Handcuffing merchants and considering it a good thing.
Centralization is a great system for generating operational efficiencies and ensuring consistent in-stocks on a certain amount of core product across a large store base. Unfortunately, it has been adopted to the extent that it's generating a whole lot of sameness, not to mention blandness, at the store level. Call it Soviet Union-style merchandising.
Great merchants haven't disappeared from the earth; but their ability to fully exercise their craft has been severely constrained. These professionals have presumably been hired for their ability to recognize what's fresh and fabulous. Restoration Hardware is a good example of a retail company that does this with great consistency. Merchants should be let out of the box more often to take some risks-and rewarded for them.
That equation should include store managers as well. Bed Bath & Beyond continues to tout the micro-merchandising authority it gives store managers as one of the keys to its success. Alas, it is in the minority. Elsewhere, your basic store manager has seen his realm shrink to inventory cop and payroll juggler. That doesn't engender a whole lot of creative thinking. And it also goes a long way toward explaining why in many retail operations, the unhappiest folks in the system are the ones in the stores.
Bad habit no. 2: Maintaining the myth of retail-vendor partnership.
I first heard the P word during an awards ceremony at which the retail community honored its top vendor partners across a wide range of product categories. As the keynote retailer stood at the podium extolling the virtues of partnership, a vendor sitting next to me snorted: "Partnership is just a polite way of saying they're screwing you."
And that was back in 1993-before sku rationalization, vendor rationalization and the rush of retailers headlong into the development of house brand labels with equal (or better) margin than national brands. Vendors continue to get beaten up on price, saddled with inventory costs and a host of other not-so-pretty policies that allow retailers to off-load some of their costs onto someone's battered shoulders. That ain't partnership, folks. And it's time we stop pretending that it is.
Bad habit no. 3: The way the financial community values businesses.
The traditional formulae by which Wall Street measures success do not satisfy the conditions that will ensure long-term health for retail and manufacturing companies. Retailers are pressured to continue flinging open stores in an over-crowded environment-and will always get clunked for it eventually. Manufacturers are encouraged to lard on more business units, when for many it is the sheer enormity of their size that is impinging on their ability to react quickly to market changes.
Admittedly, those are three mighty big dragons to slay. And last week's happy news from the Fed will probably encourage the status quo. But bad habits do have a way of eventually coming round to sink their teeth in your kiester, and sooner or later must be wrestled to the ground.
Now, if I may be excused, it's time to pop on a fresh nicotine patch and come to grips with the new reality...
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