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[21 comments]

Nobody Knows Retailers When They're Down and Out

February 27, 2013

It has occurred to me over time while reading posts on RetailWire that successful retailers that go on losing streaks (Best Buy, J.C. Penney, Kmart, RadioShack, Sears, et al) have a lot in common with the lyrics in Jimmy Cox's blues classic "Nobody Knows You When You're Down and Out."

In my favorite version of the song, performed by Derek and the Dominos, Eric Clapton sings about living "the life of a millionaire" only to find himself without a penny "and friends I haven't any."

It seems that some retailers get into a place in which every piece of "bad news" reinforces the perception of a company in trouble. Consumers are naturally attracted to winning businesses. They're only attracted to losers when it comes time for liquidation sales.

So I find myself questioning whether large layoffs, which Wall Street might welcome, actually work in some respects against turnaround efforts. Cases in point are Best Buy and J.C. Penney.

Best Buy, which has seemed almost more like a soap opera than a business since Brad Anderson stepped down as CEO in 2009, announced it will cut 400 jobs at its headquarters.

And how does a consumer seeing all the Penney commercials during the Academy Awards telecast square that with news the chain has just laid off another 300 workers at its headquarters in Plano, TX?

We all know that tough decisions have to be made at times to get a business headed in the right, profitable direction. What I can't help but wonder is if there is a time limit on bad news. How long before consumers lock-in a negative image of a retailer that becomes impossible to reverse?

FINANCIALS:     [NYSE:JCP] [ NYSE:BBY] [ ]

Discussion Questions:

How much bad news can a retail business take before consumers tune out the positive? Are there retailers today that have a bigger problem with consumer perceptions than might be warranted by their financial results?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How important is the perception of a retailer's success to its actual sales performance?

Comments:

George, I'm not sure the "average" consumer knows or cares about some of these corporate issues. They may care about the impact of these decisions if they know about them (e.g. staff cuts in stores), but I'm not sure they care if someone's cutting HQ staff.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

I also don't think consumers are very tuned-in to layoffs at the corporate level. But they do stand up and take notice if the checkout line is too long, if their products are out-of-stock or if they can't find help in the store. So, while the layoffs are very unfortunate for those receiving pink slips, and it definitely does impact the overall business (investors beware), the average consumer probably won't think twice before entering the store again, if it's a store they frequent.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

I agree with the comment the most consumers are not aware of corporate issues. If they are aware, the impact depends upon how strong their positive perceptions of the retailer are. Media sources are not always viewed as credible by consumers so if perceptions of the retailer are strongly positive, it will take news reports a long time to have a negative impact.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

I'm not sure consumers really care, provided their access to goods and services—at an acceptable price point—isn't interrupted.

Book buyers didn't stop buying books when Borders closed, they just switched vendors.

I think this apathy is a huge problem and one not necessarily reflected in the balance sheet until it's too late.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I would submit when the image put out as the brand is judged at the store level, that is where the bad news is most damaging. Your case in point of JCP and their Oscar ads versus what customers have come to find—a confusing backpeddling on pricing in particular.

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Bob Phibbs, President/CEO, The Retail Doctor

Some of the commentary falls into the "schadenfreude" category: Enjoying another's misfortune. Certainly every bit of bad news coming from JCP and BBY recently (from the results to internal management turmoil) fits this description. JCP in particular hasn't done itself any favors over the past year by relentlessly beating the drum in public for the genius of its reinvention strategy, and then proceeding to fall on its face.

But the "bad news" syndrome can also range from companies like Sears Holdings (which stopped being relevant a long time ago) to consistently great performers like Apple who are now under a microscope for any perceived misstep. Apple doesn't need to worry about its overall business model, but it does need to launch some innovative products that will refresh its image.

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Dick Seesel, Principal, Retailing In Focus LLC

Retailers are subject to public criticism. With that said, I think the impact would have to be massive to sway public opinion directly about a store. With so many Americans still out of work unfortunately, 300 jobs at headquarters doesn't sound compelling enough to connect the dots of financial results with their store not having adequate product on the shelves, or not being able to find someone to help them with a purchase.

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Zel Bianco, President, founder and CEO, Interactive Edge

Most consumers, like a lot of voters, don't really know or care much about the financial condition of an organization. They live in a "give me what I want now" world. But when the media is loaded with bad news about a company, it begins to penetrate the consumer mind. That's when customer loyalty gets trumped ... and that trumped retailer becomes yesterday.

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Gene Hoffman, President/CEO, Corporate Strategies International

I am in agreement with the comments about corporate layoffs. The average consumer does not put much stock in what happens at the corporate level. Their concern is what happens at the store level and how it might impact their favorite salesperson.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Today's consumer is a "me" person. If there is a business issue outside of their influence area, then most really do not care. The business issues they care about relate to their lives, jobs, family, etc.

If a business issue with a retailer causes an issue for them—one of the store locations for their fave grocery or electronics stores closes and they have to drive farther to shop, then they comment or complain.

For some shoppers the issue of internet security is in their space so they are always on the listen for info about the security of online shopping sites.

Bottom-line is simple: give me what I want, when I want it and at the right price.

Tom..."I got the markdown blues, baby!"

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

Thoughts become reality.

I've often seen retailers interviewed in their empty store moaning and groaning about how tough times are and how it's the government's fault and on an on. Now why on earth would anyone affirm that negative and lack programming on television, never mind in their own mind? It's like saying "I'm a loser, my store is a loser, please shop here you're probably a loser too."

If I knew the TV crew were coming, I'd bribe every friend I had to show up and jam the store. Then I'd talk about positive expectations and how much I loved my customers and how excited I am about my product line.

Stop feeding the fear-driven, angry, lack-programmed, negative, pessimistic beast! We're the ones broadcasting the bad news, so STOP IT!

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Ian Percy, President, The Ian Percy Corporation

Excellent observations below. My takeaway observation: Consumers don't know/care to follow corporate "bad" news. Consumers experience the bad news at the store/e-commerce/call center level—and vote with their wallets. Witness: Penney, Sears, B&N, even Best Buy. All have turned into dismal experiences: low stock, bad maintenance, no service.

Kirk Kirkpatrick, Principal, Essential Ventures, LLC

Most customers aren't reading the business pages, but they can pick up on negative energy in a store right away. Regardless of what's happening at HQ, it's important to keep the front line workers pumped and energetic.

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Cathy Hotka, Principal, Cathy Hotka & Associates

Large or small, online or off, retailers that consistently provide an engaging shopping experience for their customers will tend to feel far less pain from any news items.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

An interesting case study may be Gap. So much bad news and management changes and shrinking stores and lost comps, it's almost been painful to watch. But now, after at least 10 years of successive shortfalls, there's a little light. Seems they're close to the right size and they got some fashion right recently. So, it's possible to get the rocket ship going the other way—depending on size, of course. It just may take a while.

We just did a brand perception study, and Gap ranked amazingly high in awareness, amazingly low in appeal, but still very high in recent purchases. So, to further prove the point, seems like consumers will give even a brand they don't find appealing anymore some pretty good leeway in terms of purchase...simply because of history. Summary: what you've done right in the past DOES matter.

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Lee Peterson, EVP Creative Services, WD Partners

Staff cuts at HQ does impact stores in one or more areas, be it store ops, merchandising or inventory. However, the impact on the store merchandise or operations is seen only after a couple of months. The news of forced attrition at HQ does not impact shoppers; many are not even aware of it.

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Shilpa Rao, Practice Head - Merchandising, Tata Consultancy Services

I have a contrary point to raise from many of the ones offered above. I think that putting friends and neighbors out of work DOES impact how shoppers view a retailer AND with the advent of social media, the message gets out farther and faster. We ALL know someone who knows someone, who married someone who is impacted—the drip-drip-drip of unemployment will create fear among shoppers, resentment, a feeling of "tone-deafness" among executives who approve TV commercials, but put my daughter's soccer coach out of work/my son's clarinet tutor on unemployment, etc....

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David Zahn, Owner, ZAHN Consulting, LLC

If I am locked-in to a retailer, I want them to succeed. If I am faced with a situation to deepen a relationship, I might be less inclined. Some connections that come to mind:

Traditional - Store layout, driving patterns, exclusive merchandise, private label, private credit, service contracts.

Newer - Status and loyalty programs, passwords, shipping addresses, deep web profiles, wish lists, recommendations based on shopper history.

Vahe Katros, Consultant, Plan B

I think people have more knowledge than many of the commenters here have given them credit for (though from time-to-time I'll encounter someone who doesn't know where—say—Denver is, so maybe I'm being overly optimistic). But between these two extremes, we may well have the answer to George's question. Much like a fire backstage, bad news becomes a crisis when people become widely aware of it. Of course it's almost impossible to separate cause and effect: i.e. the perception of failure is usually matched by reality...JCP's recent example of turning a Thompson onto its feet and converting a long-term concern into an immediate disaster is something of an anomaly.

'notcom'

Most consumers are unaware of most company's "bad" news, since the reporting of this news is usually limited (i.e. not in the mass media). Consequently, it is not poor consumer perceptions which continue to hurt a company, but more often than not, lack of a correction to the model which brought the bad situation to occur in the first place. Most companies do not do enough to change their model, and their management, to fix this. The end result is a sale or closing of the company. That will probably happen with each of these retailers, because their models, management and stores are "broken."

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Kai Clarke, President, Kowa Optimed, Inc.

I really do believe that the consumer couldn't care less about corporate issues. Give them what they want and they will find your store and they will tell, or take their friends, to your store. Be a MERCHANT. You can not tell the consumer what is good, or "better" for them. If you offer something that is "better" for them in your opinion, but not in their opinion, they will go to where they are being given what they want.

William Passodelis, associate, ML Co.

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