Article

Opinion: The recession is over, if you're paying attention to customers

A look at two retailers on the right track, and two that aren't, when it comes to satisfying core customers.

September 8, 2010

There is no question that the US economy is still unsettled, but there is strong evidence that the retailers who are focused on their core customers continue to prosper. Read on to learn about two retailers who are on the right track and two retailers who aren't.

Macy's is finally starting to concentrate on their core customers with the My Macy's program that focuses on the regional differences of customer groups. Although My Macy's is in its early stages, the results are clear. By focusing on the differences in customer groups, Macy's has turned a multi-year negative trend into a positive. If the company stays focused on this program, it should have many years of comp store growth.

The next two companies provide an interesting contrast. There are few retailers today as similar as Kohl's and Penney's in operating style and customer appeal. The real difference appears to be in the merchandising tone, the apparent focus of management, and most importantly, the results. I have carefully studied both companies for over 30 years and have watched their successes and failures. Kohl's is crystal clear on the customers they are trying to serve. In my opinion, the merchandise is the best it has ever been with assortments that are very focused. Kohl's results confirm that consumers have money to spend if stores have what they want.

By contrast, Penney's continues to grope for a solution. The taste level in their key apparel segments is not focused on the style demands of most Americans. This point of view is clearly supported by their ever growing 70 percent - 80 percent off clearance racks. Penney's results show that the consumer knows what they want and will not buy something else. The two companies reflect the differences between Kohl's customer-oriented focus and Penney's management (ego) oriented focus. In the past 12 months, Kohl's comps are up 4.6 percent while Penney's are down 2.1 percent

The final example is Walmart, the world's largest retailer. Earlier this year Walmart made a classic mistake that can be a valuable lesson for everyone in the retail industry. In an effort to stop four quarters of declining comp store sales, Walmart launched a major price rollback program. After spending a substantial amount of money on advertising, in-store signing, and store payroll, along with receiving millions of dollars in free exposure from the news media, sales trends stayed the same and margins declined.
 
The lessons are quite interesting:

• If the customer did not like a product before the price cut, lowering the price a few cents does not make the product more desirable.
• If the customer does not like your store, lower prices do not make the store more desirable.
• If the customer is already loyal, lower prices reduce sales and gross margin dollars.

Changing a company's retail sales trends is actually straightforward:

• Know exactly who the customers are you want to do business with.
• Learn their rules.
• Execute to the customers' rules better than anyone else.

Bob Gordman is president of the retail consultancy The Gordman Group. He has spent the last 19 years as a consultant; prior to that, he was President of Strategic Business Planning for Meridian, and spent five years as a Senior Consulting Partner for the Gallup Organization, specializing in strategic planning. (Photo by paulaloe.)