The Merchant Life - Volume 40
The Merchandising Imperative for Retail CEOs
Welcome to The Merchant Life where founders, VPs, and C-Suite executives come to seek out valuable merchandising insights.
Lately, there has been a bit of scuttlebutt about retail CEOs.
How hard the job is. How many brands have CEO vacancies. The complexity of the role and the perceived lack of a talent pipeline to fill the role.
Hence, boards are looking outside of retail for candidates to take on the top job.
Although, we argue that there is an abundance of talent sitting within retail’s four walls, ideal for the role.
The trouble is, that talent is either not developed or isn’t well understood to begin with.
With that said, we build on a concept we introduced in Volume 39.
Which we call “The Merchandising Imperative.”
The Experts Weigh In
If you scrolled through LinkedIn recently, you likely came across articles in Fortune, The New York Times, and Forbes.
Each discusses the current state of retail’s top job and how it is one of the hardest roles to fill.
There are two key reasons as to why.
First, the role is increasingly more complex and dynamic. Hence, desirable candidates should be equally dynamic.
Second, talent development is not what it’s used to be. At one time, the career path in retail meant working in various functions and putting in time on the shop floor. The once legendary training programs of department stores like Macy’s, Bloomingdale’s, and Harrod’s are not what they used to be - if they still exist.
Fair enough.
The articles draw from identical sources. Coincidentally, they follow a similar structure and the arguments are indistinguishable.1
Including their take on merchandising as it relates to being top dog.
Merchandising, Misunderstood.
We pulled some notable quotes from the articles.
For example, from Forbes:
“The typical replacement fix is to find a merchant prince and princess, but they may not be the right choice for this time.”
“A strong merchant isn’t necessarily always going to be the best person to be the CEO and make the pivot,”
“Retail used to be all about the product. Today, it’s more about being tethered to the customer, being able to see around corners and where the future lies. That may not be a merchant.”
“CEOs need to understand the multi-channel environment and how customers’ needs can be served across them in a dynamic way,”
And, from Fortune:
“For decades, retailers favored the venerated “merchant prince” who chose what products to sell and was seldom questioned or called upon to deal directly with prosaic matters like distribution and operations.
Now, a CEO needs to have not only an instinct for what products customers want but also chops in other areas, notably supply-chain management, cybersecurity, sourcing, e-commerce, and store operations, as well as the ability to build teams and adopt a style of empathetic and inclusive leadership that employees expect of today’s CEOs. While finding executives with such a mix of skills is a tall order, enough companies in the industry have succeeded by finding someone with the required areas of expertise who also knows how to put together a team that complements their skills.”
Two things:
First, what is a merchant prince/princess? It’s an odd description.
Second, there is a misunderstanding of what merchants actually do, the value they provide and the outcomes they drive.
If we go with what is desrcibed above, merchants are one-dimensional and their sole purpose is meeting customer demand.
Exceptional merchants go far beyond that.
They are well versed in matters like marketing, supply chain, sourcing, e-commerce, store operations and motivating in-store teams.
Further, merchants must have a solid understanding of how their product assortment impacts the P&L. Their job is to maximize the extent of full-price sales - thus minimizing unecessary promotional activity.
Most importantly, merchants are in-tune with their customer. They accomplish this by spending time on the shop floor talking to them. This way, they have the power to generate demand and not just meet it.
In other words - they would to be tethered to the customer and be able to see around the corner.
Merchants Turned CEO
It would be helpful to provide examples of CEO’s who, at one point in their careers, served as a merchant.
Doug McMillon, CEO of Wal-Mart, took a summer job with the retailer unloading trucks in a DC. He eventually received his MBA and enrolled in Wal-Mart’s buyer training program. That was in the early 90’s, he moved up through the ranks until taking the top job in 2014.2
Brian Cornell, CEO of Target, who is known for walking the shop floor and asking customers about their experience.3 Also, a merchant.
Michael Gould, former Bloomingdale’s CEO, was once described as a very bright, marketing oriented man. This was reported in the New York Times prior to him succeeding Marvin Troub for the top job at Bloomingdale’s. Gould moved from trainee to VP to divisional merchandising manager at Abraham & Strauss.4
Roger Farah followed a similar path to Gould. Also, he was runner up to Gould to succeed Marvin Troub. But, Farah made out very well with senior roles at Ralph Lauren and co-CEO at Tory Burch.
Karen Katz, former CEO of Neiman Marcus group, credits her success to keeping the customer at the center of all business processes and decisions.5 She joined the retailer as a merchandising manager in 1985.
Add to this list names like Mickey Brexler, Terry Lundgren, Karen Hoguet and Steven Sadove - there is no shortage of dynamic individuals who ascended to take on retail’s top job.
Merchandising. Evolved.
Although we advocate for the merchandising impertaive, it would be fallacious to say that success in merchanding automatically equals CEO success.
But, it does help hedge the bet.
To hedge further, the art of merchandising must evolve in several ways.
These include:
A renewed investment in deliberate training and development.
Focus that training on enhancing skill sets in areas like emerging technology.
An intentional focus on elevating talent from under-represented groups.6
Oddly enough, in 1992, the term “New Wave retail" was coined by the chief economist of a consulting firm.7 What followed from that is the concept of "new wave merchants" who are innovative in their craft, embrace technology and have close relationships with suppliers.
The term "new wave" isn’t anything special.8
However you say it, the craft must continue to evolve.
A Final Comment
To put a bow on this - sometimes the comments section of an article is more valuable than the article itself.
Consider this comment left on the New York Times article.
“I would much prefer to go to a store and buy what I want, but the user experience has become so difficult that it's not worth the effort. There are some exceptions, but most stores I go into have the following problems:
1. I can't find what I want on the shelves. So much is 'out of stock' in the store, so I'm told to go order online. Well if I am ordering online, I am going to find the best price and it probably won't be from your company. I will pay a premium, but it's so I can take the product home with me right now.
2. I can't find a dressing room to try something on, and when I do it's dimly lit and piled up with clothes, hangers on the floor, and in general is a mess.
3. No one in the store knows where anything is when I ask--when I can find someone to ask.
4. The store is so disorganized it looks like a rumble sale.
5. There is one cashier, the line is 15 people deep, and when the technology messes up or there is a complicated issue with coupons or sale items, everything grinds to a halt.
You'll often see 3 people standing over the cash register trying to figure out what's wrong, and nobody is thinking about opening another line and taking care of the customer. Maybe it's time to ask your customers what they need in order to come back into the store. I think there are some basic assumptions executives make that are just wrong.
Try some things, be innovative.”
While retailers and their boards are scouring outside the industry to fill the top job, customers feel like this.
Maybe not every customer.
But, we would pay attention to sentiment like this.
Because exceptional merchants know exactly what the fix is.
Thank You For Reading
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And, as you’ll see, they use the exact same phrases in similar places.
Take a note of the CEOs we mentioned in the earlier section: talented, successful, accomplished. But, lacking in diversity. Considering the percentages of women and people of color in sitting in the CEO seat, the pipeline of talent is hardly dry. The well is hardly tapped.
Correction, it’s lame. The only thing worse is “merchant prince.”
To be successful, a merchant must be the #1 or #2 executive. The merchandise portfolio is critical.