Dept. stores execs discuss change
October 22, 2001,
At the FIT Educational Foundation's Rethinking Retail seminar last Tuesday, two panelists drew from their experiences with major retailers that have been forced to re-evaluate how they do business.
Since February, JCPenney has been reinvented, said Castagna. Previously, for 99 years, it was a decentralized culture, she said, with "1,100 decision makers — one in each store." That resulted in a "lack of accountability" with no one spearheading which products should be marked down, for example, resulting in products that were "not on trend."
However, "We now have one financial plan, one strategy, one marketing plan and one voice to the customer," she said.
Already JCPenney has refreshed 300 stores in the last two years. "If something doesn't add value to the customer, associate or shareholder," she said, "it's out. And that's hard to do in a 99-year-old company, but necessary." It now provides merchandise to stores weekly, when previously the company bought quarterly.
JCPenney also clarified its offerings. "We had too many shops," she said. However, now that the "jeans are with the jeans, the tops with the tops," she said, it's more convenient for the customer to find what's she's shopping for, and associates can replenish faster and better understand what merchandise is on the floor.
JCPenney also decided to delve back into businesses relevant to today's consumer, like housewares. "We need to go beyond apparel with dominant key categories that will drive traffic."
Castagna later told HTT that in the home textiles area, the two largest changes are "a focus on clarification — we want to be the headquarters for bath towels, sheets, and pillows and pads." The other is that it wants to "shout it out to the customer," with more frequent marketing. "We try to talk to her every week."
Jones, who joined Saks last February, said department stores nationwide face a huge challenge. Department stores lack product differentiation, and many of the anchor stores in malls, for example, all look similar, he said. Jones also noted stores have not turned merchandise as quickly as a fashion business should and pricing credibility has eroded.
"The department store industry has ceded its traditional fashion authority to a limited number of resources," he said, and there is an "over-allocation of space to vendor shops" and an "over-reliance on mega brands and collections."
Jones lamented the use of coupons, one-day sales, customer appreciation events, which have become the norm. "Promotional pricing may have driven short-term sales, but it has destroyed pricing credibility."
As a result, Saks strives to deliver the right product to its customers through private brands and systematic allocation. According to Jones, Saks will grow its private label from its current 12 percent to 15 percent to 20 percent within two to three years. Saks will also identify new resources, edit collections and intensify key items.
Jones added that Saks hopes to re-establish pricing credibility with a more targeted promotion strategy, as well as develop everyday low prices on key selected items. The company hopes to improve service with centralized customer checkouts in key departments, creating selling specialists and reducing non-selling tasks on the selling floor.
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