NEW YORK — “We are living in a period of rapid change.”
That’s how Walter Loeb opened his comments to the Retail Marketing Society on “The Rise and Fall of Retailing” on Thursday at Arno Ristorante here. After a 65-year career as analyst and observer, Loeb, who still blogs and does consultancy work for retailers, has decided Thursday’s presentation would be his last public speaking engagement.
Margaret M. Cannella, a former managing director and global head of credit research at J.P. Morgan Chase & Co., and adjunct professor at Columbia Business School, introduced Loeb as “my mentor and friend,” noting that everyone thinks of him as the “preeminent analyst” who speaks with industry executives, while quietly questioning the validity of what he’s told.
While he thinks the retail sector is a dynamic one, Loeb wasn’t exactly enthusiastic about the changes he sees coming and its impact on the industry. And while the competition is getting stronger, leadership in retail has gone in the opposite direction.
“In the 1980s, you had Federated Department Stores, J.C. Penney, Kmart and Sears and Wal-Mart that had strong entrepreneurial management. In 2015, you have Amazon, Macy’s, TJX, Costco, Home Depot and maybe Wal-Mart, but not Alibaba. I’m not including Alibaba because I don’t know what the Chinese government might do to change its momentum in sales,” Loeb said.
He said that presently, company managements for the most part are “weak, and getting weaker.” He attributes that to the absence of management training programs that used to be prevalent in the sector. “There is a great deal of attention now on open to buy and how the stock market reacts to inventory,” Loeb said.
As for what makes a great merchant, Loeb said: “Great merchants have a feeling for the product they sell. They encourage and motivate creativity, and they understand their customers and fashion their stores to their shoppers….A merchant is important in a company. Unless a company is led by a merchant, it will not be successful in the future.”
Loeb cited a number of retail executives that stood out over the years and why they were instrumental in transforming retail into what it is today:
- Harry Cunningham, Kmart — creator of discounting;
- Sam Walton, Wal-Mart — creator of discount ambiance and planned expansion;
- Ed Finkelstein, R.H. Macy & Co. — creator of basement ambiance;
- Bernie Marcus, Home Depot — do-it-yourself and home care;
- Sol Price, FedMart, Price Club, PriceSmart, now all merged into Costco — warehouse sales;
- Jeff Bezos, Amazon — technology;
- Millard “Mickey” Drexler, The Gap — known for “fashion at a price; a genius at the time, although I’m not sure about some of the things he’s done now.” Loeb’s criticism of Drexler, now at J. Crew, centered on the “stores becoming boring; the stores are not as dynamic as they were so consumers are going elsewhere”;
- Terry J. Lundgren, Macy’s — national brand department stores;
- Brian Cornell, (Target) — revival of a brand that had a flair for fashion.
Loeb also spoke about the search for leadership, and what has happened in that arena:
- Ron Johnson “was new blood for J.C. Penney, but created havoc”;
- Jeff Gennette is president of Macy’s and chairman-in-waiting for when he will be anointed;
- Ernie Herrman, the new chief executive officer of TJX, replacing Carol Meyrowitz at the end of the fiscal year;
- Marvin Ellison, who moved to J.C. Penney from Home Depot, and is “strong in service, but not the foggiest notion of what merchandising is all about”;
- Kohl’s has been “looking for the last two years, and they wonder why they can’t find anybody.”
Then there are the destructors that Loeb pointed to:
- Ron Johnson — “While managing J.C. Penney, he almost bankrupted the company and let’s leave it at that”;
- Eddie Lampert — “He’s emasculated Sears and is making it a real estate company. It is no longer a merchandising company”;
- Richard Baker, Hudson’s Bay Co. — “He has great real estate ability, but he doesn’t understand that a company, each one, has to have a merchandising goal.”
Loeb said competition in retail is getting stronger, and cited Primark’s entrance into the U.S., noting that they are in search of a location around 34th Street in Manhattan. “Some say they go into Primark and get sticker shock because the prices are so cheap,” Loeb noted.
He spoke of what he’s learned from visiting Galeries Lafayette, noting that Chinese and European shoppers stand in line for brands such as Louis Vuitton, Dior and Chanel, and that those concession shops have a high rate of sales — that’s the wave of the future in the U.S. “There is an advantage for retailers not having the burden of the inventory,” he said, citing Macy’s agreements with Finish Line, Lids, Sunglass Hut and Tuxedos from Men’s Wearhouse as “new steps in this area.”
Loeb predicts that November sales more disappointing than expected and a slow December will result in “strong promotions unleashed for the rest of the month.” But he also wasn’t keen on the promotional environment so far.
Showing an advertisement from Lord & Taylor for a friends and family sale, Loeb said, “Macy’s has been having a friends and family shopping [event] since last week. Lord & Taylor is doing the same thing. Anyone can be a friend and family to anybody. Initially when it was a private letter, it was great. Now it is an overused term and customers don’t believe in it anymore. There’s also the Super Saturday sale, but the store [says it] is also open extra hours on Thursday, Friday and Saturday.”
As for early 2016, Loeb said, “The clearance mood will continue. There will be no major bankruptcy on Jan. 10, 2016. That is the most positive thing I can say.”