There’s one way to manage through “the new normal” — restructure.

This story first appeared in the November 5, 2009 issue of WWD. Subscribe Today.

That’s the call from leading industry figures, notably Allen Questrom, who believes retailers must start selling “real people,” think casual and less skinny when it comes to merchandising, and take a lesson on providing value from Wal-Mart Stores Inc., where he sits on the board and sees revenues eventually topping $1 trillion. The chain surpassed $400 billion last year.

“Just cutting expenses is not the answer. You have to totally restructure your business,” said Questrom, who was among those on the Emanuel Weintraub Associates panel, “Doing Business in the New Normal,” held Wednesday at the Harvard Club.

“This is a time when retail is in a place to rewrite the rules. Recession is a cleansing period,” said Marshal Cohen, chief industry analyst, The NPD Group. “In 2010, the cream will rise to the top.”

“Don’t let a good recession go to waste,” said Stephen I. Sadove, chairman and chief executive officer of Saks Inc. “We are using the recession to challenge everything the company does.”

Susan Lyne, ceo of the Gilt Groupe, and Peter Sachse, ceo of macys.com and chief marketing officer of Macy’s Inc., were also on the panel, but Questrom was the main attraction. “Wal-Mart will be a trillion-dollar company,” said the former ceo of J.C. Penney Co. Inc., Federated Department Stores Inc., Barneys New York and Neiman Marcus Inc., without giving a time frame for reaching that milestone.

One big reason for that is international growth. “Wal-Mart is the only company today that is able to be out in the world,” he said. While Wal-Mart has the lowest expense ratio in the U.S., it’s also able to operate at low cost in China, Questrom said. “In the next 12 years, China’s economy will be bigger than the U.S. economy. Three years ago, we were five times as big. The U.S. will be second, India third,” he continued.

“People say department stores are dying, but Wal-Mart is a department store,” Questrom said. “It’s got more departments than Macy’s.” However, the rest of retailing won’t grow like Wal-Mart, implied Questrom, once known as retailing’s “Mr. Fixit” before retiring five years ago. “If you don’t look to a very slow growth for the next five, 10, 15 years, you are not dealing with a full deck of cards.”

His advice to retailers: “Make stores look like they are trying to sell real people [not runway models]. Look at how to casualize assortments, and study younger people to see how they put it together and immerse yourself in what’s going on around you. That’s the only way to adapt.”

Aside from Wal-Mart, he’s impressed by Old Navy for introducing new colors, products customers want and sales increases that are “real.” He also said Uniqlo reminded him of Gap 25 to 30 years ago, and credited Ann Taylor for new price points, selling separates as opposed to outfits and being very career-directed.

At Saks, product, selling environments, costs and marketing have been overhauled, Sadove said, noting $135 million was taken out of the cost structure in the past 12 months. Business and marketing plans and assortments are done on a store-by-store basis, and there’s a “new product model” based on limited distribution, exclusivity and the message, “If you don’t buy it now, you won’t see it on a go-forward basis.” That sense of shopping urgency was furthered last week when Saks staged a “fashion fix” 36-hour online sale, in a test offered only to customers receiving Saks’ e-mails. Sadove said the tactic was “very good” and would be repeated. “You will find Saks very aggressive in these areas. The ability to play in [the social media] space is enormously powerful.” The e-mail featured a running clock showing the time remaining for placing orders.

Sadove said business has become more predictable in the last six months and expects to see “some degree of improvement but not rapid as you go into 2010.”

“We’re nearing a very important inflection point,” with specialty retail down just 1 percent in September, said Jeffrey Klinefelter, senior research analyst at Piper Jaffray, covering specialty retailing, youth/teens, mass merchandising, and apparel and footwear brands. “Trends in discretionary categories have stabilized just recently….Inventory is as efficient as it’s ever been, creating a tremendous amount of profit growth over the next couple of quarters.” The fourth quarter, he said, will be “great” because of “easy” comparisons to last year’s numbers, and because “people are no longer shell-shocked.” He predicted a “very modest recovery” in 2010 for the sectors he covers.

“What happens after stabilization? You start a recovery,” said NPD’s Cohen, sounding an upbeat note. After the industry’s massive layoffs, job performance is at 114 percent efficiency, he said. “That alone will drive business.”

load comments
blog comments powered by Disqus