Big Retail’s Embryonic Ideals

Posted by Carol Spieckerman on July 16, 2012

It doesn’t seem that long ago that the term “start-up” conjured up thoughts of a well-meaning but misguided enterprise, particularly when associated with retail. (Cue the “In THIS economy?” chorus.) Economics aside, retail has been a “the big get bigger” proposition ever since mass retailers began roaming the Earth—and later, as Amazon, eBay, Taobao, and other e-tail hubs made virtual mass a disruptive retail reality. Oh sure, there have been just enough occasional exceptions to keep retail conspiracy theorists at bay, but Lululemon-like rags-to-riches success stories have been few and far between.

Retail start-ups may not be launching right and left, but major retailers and brands have begun to embrace embryonic ideals in order to ensure their place in retail’s future.

Determined to ramp up rapidly for all things social, digital, and mobile, major retailers and even advanced digital players such as Amazon have taken a massive shine to technology start-ups, either through partnership or acquisition. Tesco’s acquisition of a 91% stake in digital music service We7 last month is a recent example that also demonstrates retailers’ growing penchant for entertainment, social-media, and location-based acquisitions, rather than traditional made-for-retail solutions. One can only speculate what Amazon will do with just-acquired UpNext’s 3-D mapping capabilities, for example, but surely commerce capabilities won’t get left out of the equation.

Hungry, Scrappy Megabrands
Under Bill McComb’s leadership, Fifth & Pacific (formerly Liz Claiborne, Inc.) has whittled what was a 30-plus brand portfolio at the time of his arrival in 2006 down to three core brands: Kate Spade, Lucky Brand, and Juicy Couture. Collectively, the brands bring in multi-millions, yet in May, McComb referred to them as “hungry, scrappy start-ups,” touting their entrepreneurial beginnings and “lean, fast-moving, and super innovative” teams.

Daring Do-Overs
August’s promised store beautifications can’t crank up fast enough for J.C. Penney as CEO Ron Johnson’s stay-the-course mettle continues to get tested. The numbers slide that’s been seen in the wake of the venerable department store’s new pricing strategy will soon be complemented by visual evidence of a Penney metamorphosis in its stores. But Mr. Johnson’s vision wasn’t to gently steer the soft lines giant into new waters. In April, he stated that Penney will be “on the cutting edge of a new approach to retail” by operating “like a start-up.” That’s might seem like a major metaphorical leap for a century-old department store with over 1,100 locations, but Johnson’s scorched-earth plan is definitely starting to look more like a tear-down than a fixer-upper.

The (Retailer’s) World Is Flat
Penney’s large-scale layoffs have gotten a lot of attention lately, but Johnson’s overarching organizational plan is to reduce layers of management—and one layer walked out last month when the company’s president, Michael Francis, departed abruptly after only eight months on the job. With Johnson assuming Francis’ merchandising and marketing duties, and given his stated intention to keep it that way, Penney will be operating with a flatter, start-up-like management structure the likes of which department store retailing hasn’t seen since its beginnings in the mid-1800s. Walgreens’ move to eliminate the chief marketing officer role on the heels of Kim Feil’s departure late last year was groundbreaking at the time, but clearly other retailers are challenging layered organizational structures.

Bill McComb summed up retail’s newfound start-up sensibilities perfectly when he said that it’s important for leaders to lean into the future by “driving an organization toward something and not from something.”.

Bottom line:

  • One of the easiest ways to achieve alignment with retailers is simply to mirror what they are doing—or at least for now, to not offend their start-up sensibilities.
  • Retailers will be less receptive to hierarchical supplier structures and layered decision-making as their organizations become flatter. As Executive Vice President Pam Kohn stated in a recent presentation, Walmart favors supplier teams comprised of empowered people who can make quick decisions.
  • Brand marketers would be wise to watch changes to specific retailer organizational closely. Modifications are going far beyond simple transition plays—they’re radically altering fundamental structures.
  • The acquisitions and partnerships that retailers are forging point to what they value. Which gaps are they attempting to fill and how can you position to them?

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