Photo: Pier 1 Imports
Pier 1 seeks yet another turnaround strategy
Pier 1 Imports said last week that its CEO, Alasdair James, had stepped down and that Credit Suisse has been retained to explore financial alternatives.
Formerly president of Kmart, Mr. James led Pier 1 since May 2017. In May 2018, a three-year turnaround strategy, “New Day,” was launched that called for steep losses in 2019 followed by sales growth and profitability over the next two years.
The plan was informed by research that found shoppers felt Pier 1 competed with At Home, Cost Plus World Market, and TJX’s HomeGoods and Home Sense chains, as well as Target. Previously, Williams-Sonoma, Pottery Barn and Crate & Barrel were seen as primary competitors.
The “New Day” plan shifted to a good/better/best pricing structure with some opening price points lowered to better compete. The program also included a wider breadth of merchandise; and a new “This is Me” slogan to emphasize how the chain appeals to customers’ individuality, a focus on fresher assortments, reducing in-store clutter and positioning store associates as design guides.
On its third-quarter conference call, Cheryl Bachelder, interim CEO, said New Day “did not deliver the desired results fast enough.” Comps dropped 10.5 percent in the quarter.
She added that while the overall home furnishings and furniture sector is “performing well,” Pier 1 found “mixed success” with moves to lower prices to reframe its value proposition.
Ms. Bachelder, the former CEO of Popeyes, said the initial focus for the retailer would be implementing a “rigorous cost reduction program” and narrowing the chain’s focus “to provide the distinctive Pier 1 style and value proposition desired by customers.”
The tighter focus will be guided by Donna Colaco, the former president of Chico’s FAS’ White House Black Market business, who was appointed chief customer officer in December.
Said Ms. Bachelder, “I think, we may have confused our customer a bit by the number of items and value opportunities we put in front of them, so I think getting really crystal clear on the items and the focus, that’s going to drive our top line.”
- Pier 1 Imports, Inc. Appoints Cheryl A. Bachelder Interim Chief Executive Officer – Pier 1 Imports
- Pier 1 Imports, Inc. Reports Third Quarter Fiscal 2019 Financial Results – Pier 1 Imports
- Pier 1 Imports Inc. (PIR) on Q3 2019 Results (Earnings Call Transcript) – Seeking Alpha
- Pier 1 Imports Announces Three-Year Strategic Plan at its Analyst Day – Pier 1 Imports
- Pier 1 taking aim at HomeGoods, Target shoppers – Furniture Today
- Pier 1 rolling out $45M in strategic initiatives – Furniture Today
- Pier 1 plans revamp to up Millennial appeal –- Bizwomen
Discussion Questions
DISCUSSION QUESTIONS: What retailers do you think are Pier 1 Imports’ primary competitors? What do you think Pier 1 needs to do to reposition itself in light of consumer shopping trends and competition within the home furnishings market?
Poll
BrainTrust
Art Suriano
Chief Executive Officer, The TSi Company
Cathy Hotka
Principal, Cathy Hotka & Associates
The home goods/furnishings category is jam-packed with competitors including an abundance of formidable online players like Wayfair and Amazon. Pier 1 is clearly struggling to find its place in the market, and the challenge is made more difficult with the leadership changes and poor financial results. Pier 1 needs to think about rationalizing their 900+ store base and re-focus efforts on driving productivity in their remaining stores. Simplifying lines and getting back to basics is an important first step.
The phrase “everyone is the competition” in retail is usually an exaggeration but for Pier 1, it’s close to true as so many retailers try their hands at the home furnishings business. The retailers mentioned are certainly major competitors but in general, it’s retail’s endless online aisles that are causing the most pain. That’s where Target and others showcase thousands of home furnishings items that never find their way to store shelves. This presents an interesting conundrum: online retailers grab sales away from Pier 1 as shoppers launch online searches (and recommendation algorithms take over). Pier 1 has an advantage anytime a shopper walks in a store. The problem is that Pier 1 stores aren’t ubiquitous and, unlike its major brick-and-mortar competitor, Home Goods, the treasure hunt urgency isn’t as compelling. Pier 1 might do well to amp up the planned scarcity and even position itself as more of a hybrid (akin to World Market and yes, Home Goods) by adding gourmet, non-perishable food and additional home-related categories into the mix.
Unfortunately for Pier 1, the TJX juggernaut, including Home Goods, continues to make waves in the industry. The sheer size of the company can make it difficult for competitors. This is a happy thing for consumers, but it makes it hard for our friends in Fort Worth.
My advice to Pier 1 is rather than worrying about the competition, find your niche and stay that course. I see Pier 1 as a company for too many years struggling to find its own identity and a substantial reason for customers to be loyal. Sure, they stop in and browse, but unlike competitors such as At Home and TJX, Pier 1 lacks the repeat customer. There is a tremendous amount of competition in furniture as well as knick-knack items. So, Pier 1 needs to figure out how they can be not a “me too” company but a different one that will have their own appeal. I see leadership both past and present not adopting this philosophy as they appear to be chasing the competition. When that is the strategy, a company is almost destined to fail. Leaders are winners and followers are not.
The primary issue at Pier 1 is the offer: it is jumbled, confused and very indistinct. This might be a function of a lack of customer understanding, but until it is sorted, Pier 1 will remain a retailer that simply falls off of many shoppers’ radars. It is imperative that Pier 1 improves its profile and attractiveness among consumers.
It is also worth noting the sub-optimal fleet. For some reason, Pier 1 chose to locate many of its shops in rather price-focused retail strip malls. Here in Arizona, we have quite a few stores in centers with retailers like Dollar Tree and Famous Footwear. The retail location may have changed around Pier 1, but it’s not attracting the type of footfall the retailer needs to thrive.
“Williams-Sonoma, Pottery Barn and Crate & Barrel were seen as primary competitors.” Therein lies the problem. If Pier 1 had focused on becoming the Primark of this channel, they would have had a much better chance of success. They ceded a lot of ground to HomeGoods and others while taking on the formidable task of competing with Williams-Sonoma and others. Not sure they ever had a chance at that level.
Cheryl Bachelder is right on the mark stating, “getting really crystal clear on the items and the focus” will drive the top line. If the customer gets confused about your value proposition, or about what you are selling in retail — or even the brand position — then you are lost. Focusing on clear market positioning, and not giving in to the temptation of spiraling to the lowest-cost provider, will be key to Pier 1. Right now they are a premium or high-end brand. It is important to continually remind customers about that value proposition, and place in the market.
I’m thinking IKEA would be a major factor as well right? I’m afraid though, that Pier 1’s ratan based, ’70s India perception precedes them, which does not exactly resonate with Millennials today — or anyone for that matter. To me, it’s not the competition, it’s their own 40-year-old brand baggage (merchandise in particular) that’s the problem. Until a major shift happens there, and not just in advertising, it’s going to be a downsize-driven, downhill sled ride.
Pier 1 as of late seems to be lost in the forest and having difficulty deciding who they are and how to get to who they want to be. Obviously, over the years the competition has grown from a few to many. Another problem I find is that it is easy to navigate the competition’s stores; yet difficult to navigate and find what you are looking for at Pier 1 without help. They are playing from behind now. But Cheryl Bachelder is one I feel can bring them out into the sunlight with her vision and leadership.
Pier 1 is falling victim to trying to be everything to everyone and not being clear on who their customer is and what their brand stands for. Are they a mid-tier decor player or a “treasure hunt” store? I agree with their new CEO that they need to be “crystal clear” on who they are and how they get there. I think they also need to look at their retail footprint. Their locations (at least in my area) are not in high traffic centers or malls — they are either stand alone stores or in small plazas. In order to go to Pier 1, it’s a destination that people don’t seem interested in stopping in.
I’m with Art Suriano: “Find your niche and stay that course.”
Or maybe recapture your niche and make it better. Our local Pier 1 store recently debuted a confusing new layout that is more warehouse and less tabletop treasure hunt; it’s a look that can be found in any store that sells home decor. Pier 1 lost its identity trying to be like HomeGoods.
Customer service at Pier 1 is solid; put associates out there as a decorating resource. Embrace lifestyle merchandising; display products in a manner that helps shoppers easily visualize what it might look like in their own homes. No one goes to Pier 1 for a $5.99 candle, so don’t take the in-store experience down to that level.
Since Pier 1 has not carved out a unique niche, its competitive set is broad, which leads to many of its challenges. If you ask 10 people to describe Pier 1, you would probably get 10 very different answers. Their competitors include World Market, HomeGoods, Crate & Barrel, Target, Walmart, Amazon and many more.
Pier 1 needs to identify what their brand stands for and clearly differentiate their brand from the plethora of home furnishing options available. Once the settle on a brand identity, they need to communicate it to consumers. That’s the expensive part that is difficult, especially for a financially challenged brand. Social media is probably their best bet for spreading the word.
Pier 1 needs to cut stores, cut products on the shelves, and cut pricing. Their offerings should only represent their best product in a category that combines pricing with positioning that leads a category. There should only be 1 of these. Inventory should be tightly controlled and staggered roll-outs for new SKUs should be considered where possible. Only the best stores with the best sales should be kept and the rest sold off. Cut costs, cut employees, cut stores, cut inventory should all be the primary mantra of Pier 1.