Three Departures

The airwaves have been filled all day long with news, commentaries and tributes to the Great Lady, the Iron Lady of British politics, the longest serving British prime minister of the 20th century, the indefatigable Margaret Thatcher who taught Ronald Reagan a thing or two about what it means to be conservative, who is credited with, at least temporarily, stopping the slide of the British Empire, or at least shoring up the pride behind the Union Jack. Thatcher died Monday. She was 87.

No less an iconic cultural figure passed away Monday, as well. Annette Funicello, one of the original Mousketeers of Walt Disney’s Mickey Mouse Club died. She was 70. For many of my age cohort, she was the embodiment (emphasis on body) of growing up in the 1950s and early 1960s, first from her exposure on the Mickey Mouse Club and then from her recurring beach party films with Frankie Avalon. 

When the Mickey Mouse Club made its debut in October 1955, Funicello was but 13 years old. I always thought my sister Lee, four years younger than her, looked a lot like Funicello, though as Annette grew older and filled out her Mousketeer shirt, Lee’s resemblance appeared less prominent. 

Though it lasted for only three original seasons, when I was six through nine, I really loved the Mickey Mouse Club, especially the Spin and Marty dude ranch serial. Tim Considine played Spin, and later the eldest son of Fred MacMurray on My Three Sons. 

A departure of a different kind took place Monday at J.C. Penney. Ron Johnson, the CEO recruited from Apple, has been sacked, a little more than a year since taking the helm at Plano, Tex.-based Penney. He was replaced by the man he succeeded, Myron “Mike” Ullman, brought back from retirement (http://www.chainstoreage.com/article/johnson-out-ceo-jc-penney-ullman-back). 

Johnson’s fall from grace was swift but not unexpected. After scoring a success with the sleek Apple stores he helped create, it was not a surprise that transforming a dowdy department store with 100 years of tradition and arteriosclerosis would be difficult. 

Where will Johnson go from here? My guess is he will land at another specialty store, perhaps Best Buy which has been troubled of late and has the added benefit of being based near Minneapolis where Johnson worked as a key executive of Target.  

Personalizing the News: Autobahn Driving, GOP Stubbornness, A New Pope and Penney Problems

Under snowy conditions Tuesday in Germany, about 100 vehicles crashed on an autobahn near Frankfurt. No doubt, the snow contributed to the massive crack-up. But I also have no doubt the pattern of German driving contributed, as well.

During my first trip to Germany, in 1996 to attend the EuroShop conference in Dusseldorf, I was invited by the team from Boston Retail to tour some stores. They had rented a car, a large Mercedes sedan, with a driver. I sat in the middle of the rear seat with an unobstructed view of the speedometer. German cars measure speed in kilometers per hour. It’s a simple computation to convert the number into miles per hour. Simply multiply it by 60%. 

When the speedometer needled its way toward 160, I could barely contain my anxiety as I also had an unobstructed view of the traffic in front of us, which at that moment was no more than two car lengths ahead. It wasn’t that our driver was a tailgating daredevil. Every driver on the autobahn was spaced the same one to two car lengths behind the car he was trailing. To travel less than 96 miles per hour would endanger all. 

Of course, that means when a car slows down, because of snow, fog or some other reason, there is a chain reaction should any one vehicle not brake to the precise slower speed. Large pile-ups are common in Germany.

All for Naught? Why do we bother holding elections if the party that loses just regurgitates the same garbage that cost them the election? I’m talking about the Republican budget proposal that would slash Obamacare, transform Medicare and reduce other social services programs without asking any more in taxes from the wealthy. It’s the same hogwash that voters repudiated in the last election just four months ago.

Since losing the presidential election to Barack Obama and seeing their ranks in the House and Senate shrink, Republicans have shown little if any inclination to change their national message and appeal. Their only salvation for the moment is their hammerlock on state governments where they have gerrymandered congressional districts into safe GOP seats, safe, that is, if their candidates hew to the hard right to avoid a Tea Party primary. 

Doubtful we will get a legislative branch of government in the short term that will function to the welfare and benefit of the country rather than the partisan aggrandizement of each congressman.

For Old-Time Vatican Watchers Only: As I listened to CBS News correspondent Allen Pizzey report from Rome over the last several days, I was nostalgic for the hushed, clipped tones of Winston Burdett, the network’s Papal eyes, ears and voice during the 1950s and 1960s. His weathered look gave his Vatican reports a certain ancient authenticity, not that Pizzey’s reporting hasn’t been crisp and informative. (BTW, did you know Burdett was a self-confessed spy for the Soviet Union? Rather than throw him under the bus, Edward R. Murrow had him transferred to CBS’ Rome bureau.)

No need to guess about this—with the election of Francis I Tuesday we will be subjected to a stream of articles on the significance of his elevation from archbishop of Buenos Aires to the 265th successor to Peter as the bishop of Rome. Cardinal Jorge Mario Bergoglio is the first pontiff to be elected from the New World, though he has roots in the Old. Before he was born 76 years ago, his parents emigrated to Argentina from Italy.  

In 2005, Cardinal Bergoglio was the runner-up to Cardinal Ratzinger’s election as Pope Benedict XVI. Yet he was not considered a front-runner this time. As he was chosen on the fifth ballot, perhaps he was a compromise candidate, someone who, in Pizzey’s words, while not a fan of the embattled, scandal-plagued Roman Curia, nevertheless is seen as an ultra-conservative and ultra-orthodox cleric not likely to shake up church dogma on such issues as abortion (which many in Argentina favor, according to Elaine Cobbe of CBS) or celibacy for priests. 

The new pope is said to be a humble Jesuit who lives simply and rides the subway to work. Though the trappings of his new office will require lifestyle changes, his emphasis on eradicating poverty and helping the indigent and less fortunate could have political repercussions in the United States where Republican efforts to limit or eliminate programs to help the poor would undercut his mission.

It was speculated the College of Cardinals would choose someone younger. After all, Francis I is only two years shy of  Benedict’s age when he ascended to the papacy. What’s more, he has only one lung. In his appearance before the crowds in St. Peter’s Square, he appeared restrained, barely cracking a smile. Perhaps exuberance is not appropriate at such a solemn occasion, but as the leader of 1.2 billion Catholics beset by numerous ecclesiastical and administrative issues (some would say scandals), Francis I will have to show more energy than he did from the balcony of St. Peter’s.

In the theater world, second acts are among the hardest to pull off. Third acts, almost impossible.

It’s that way in retailing, too; no less a luminary than Gordon Segal, founder of Crate & Barrel said, “Retailing is theater.” Few retail executives have been able to replicate success after success after success at different companies. 

Ron Johnson, the beleaguered CEO of J.C. Penney, is finding that out the hard way. After a notable career as a vice president of merchandising at Target, Johnson stunned the retail world with his evocation of retail nirvana—he developed the Apple Retail Stores. Apple stores boast among the highest sales per square foot in the industry. While almost all other mall stores can be empty on any given weekday, Apple’s are a beehive of activity. 

For sure, Apple products are key attractions. But equally magnetic have been the store design, the attention to detail and customer service, particularly the Genius Bar Johnson pioneered at the back of each location.

It was inevitable Johnson’s success would lead to his recruitment. Penney, though, is a far cry from Apple. Its products don’t have the cache of Apple’s. Apple concentrates on one category of merchandise. Penney is multi-dimensional, which means its messaging is dispersed across many areas, to many different types of customers. Its stores are way larger. Penney’s store staff are not brand proselytizers the way Apple’s are. Apple almost never ran sales; customers came into the stores because they wanted to. Penney had to rely on sales to generate traffic. When Johnson tried to change that by going to an everyday low price strategy, they stopped coming. (Johnson’s disappointment in that tactic is not unique—Food Lion recently pulled its “no sales” platform, as well.) When Johnson came to Apple, he had a supportive leader in Steve Jobs. They worked off a tabula rasa to create a unique store experience. At Penney, Johnson had to work with 100 years of heritage, arteriosclerosis and all. 

Johnson’s latest misstep is his apparent disregard for an exclusive contract between Macy’s and Martha Stewart. He seemed to encourage placement of Martha Stewart products in Penney stores, the result of which has been embarrassing revelations during a Macy’s lawsuit contesting the Stewart-Penney alliance. I won’t go so far as retail analyst Walter Loeb who suggested “this could be a fatal blow to J.C. Penney.” But I do believe it could signal the end of Johnson’s leadership of Penney. His tenure is not helped by the company’s performance in the fiscal year ended February 1: year over year sales dropped by $4.27 billion; the company lost $985 million compared to a loss of $152 million the year before. Share price tumbled by 60%; 2,200 workers were laid off last week. 

Sales Promotions and Top Down Management

Did you hear about the Baltimore furniture store that gave away $600,000 in merchandise as part of a Super Bowl promotion that promised free goods if a Baltimore Raven returned a kickoff for a touchdown during the penultimate game? 

Anyone who bought furniture between January 31 and 3 pm game day last Sunday from any Gardiners Furniture store would have their money refunded. Gardiners had been running a Super Bowl kick return promotion for three years before Jacoby Jones ran 108 yards to pay dirt at the start of the second half of the game the Ravens won. Co-owner Gary Mullaney sponsored the promotion as part of a traffic-building scheme. Fortunately, for Gardiners, he also opted to insure his idea, just in case. The insurance policy cost $12,000 (http://www.baltimoresun.com/features/bs-ae-gardiners-follow-20130204,0,6257047.story). 

As I write this, it’s snowing outside, the early stage of a blizzard that will blanket the New York metro area as it makes its way up into New England. I’m reminded of a sales promotion tied to snowfall run by Potamkin Auto Centers Limited of Manhattan back in January 1996. Potamkin promised free leases to anyone who signed for a car between December 22 and January 2 if it snowed more than four inches in Central Park on January 8 between 10 am and 10 pm.

Sunday, January 7, it started snowing, and snowing and snowing. The biggest snowfall in 48 years. All told, 20.6 inches fell from Sunday through Monday. But Potamkin escaped unscathed, except for its insurance policy of $32,000, because the devil was in the details. During the 12 promotion hours, only 3.3 inches of snow fell (http://www.businessinsurance.com/article/19960114/ISSUE01/100011057). 

I was reminded of this brush with snow history because I recall being told the idea for the car lease promotion might have come from an ex-publisher colleague who was working for Potamkin at the time. I can’t verify if Arthur was indeed the originator of the plan, but it worked. Potamkin leased 104 cars during the contest period, worth nearly $1 million in rental fees.

Arthur died recently. I think he’d appreciate being remembered for his salesmanship, even if he wasn’t directly involved.

Top Down Management: With much fanfare one year ago J.C. Penney announced a new policy of everyday low prices. No more sales every week. Just everyday low prices. With little more than a whimper two weeks ago the company reversed course and conceded customers couldn't be enticed to shop its stores without the attraction of sales. So they're back.

This reversal of fortune is a slap in the face of CEO Ron Johnson, who came to Penney from a successful stint as head of Apple’s stores. Decisions by CEOs often run counter to expectations, but are made for personal as well as business reasons.

Sticking with Penney, some 25 years ago the company abandoned its New York headquarters in favor of Texas, because, it was rumored in the trade, its then chairman William R. Howell was interested in running for the U.S. Senate from his native state, Oklahoma. Never happened, to my knowledge, but he did commute by helicopter to the new corporate headquarters in Plano, outside Dallas. 

Target changed its check acceptance policy when its leader couldn’t pay for purchases to furnish a condominium he and his wife bought as a warm weather vacation retreat from Minneapolis’ brutal winters. When Bruce Allbright rolled his shopping cart full of household goods up to the checkout counter, the cashier told him corporate policy stated the maximum personal check she could accept was for $100. Though he complained it was an unrealistically low amount, she responded that even if he were the chairman of Target she could not violate company rules. She stood her ground even when he revealed himself as chairman of the chain. The next day Allbright amended company policy to accept checks up to $1,000. 

Most supermarket chains have one store that stands out from all others, in appearance and in the diversity and quality of its offerings. It usually is known as the chairman’s store, the one where he or his wife shops. So it was with the now defunct Colonial Stores of Atlanta.  

It happened some 30-plus years ago that in its effort to cut labor expenses Colonial’s management team decided meat no longer would be processed in-store. Whatever was shipped to the stores and arranged in the refrigerated bins was the only meat available. And so, the story goes, when the chairman’s wife went to her store to pick up some chop meat, and couldn’t find any, she was stymied in her efforts to get the staff in the meat department to grind up some chuck. Against new corporate rules. 

She bought some prime beef, brought it home and cranked it through her hand grinder for a meat loaf. Her husband praised her cooking that evening, but swallowed harder when she explained what she had gone through and what she paid for the prime meat instead of the chuck she originally sought. Recognizing the inconvenience and the extra expense his customer would face, the chairman rescinded the meat department rules.

Judge Not

Twelve years ago tomorrow, according to the Jewish calendar, Nathan Ancell passed away.

He was 91, a frail man. I didn’t really know him. He was a member of my synagogue, a regular attendee of Sabbath services. He sat in the back. Back then I was the head gabbai of our congregation (a gabbai, for those not familiar with the Hebrew term, is a glorified head usher, assisting the clergy by handing out honors and maintaining proper decorum during the service).

As I walked around the sanctuary, I’d notice him sitting by himself, barely able to stand when necessary, suspenders keeping his pants high up on his torso in the manner of many an elderly man.

The day after Nathan Ancell died on May 31, 1999, his obituary made the front page of the NY Times!

Needless to say, I was flabbergasted. And professionally embarrassed, for you see, though I was a supposed maven of retailing, I was unaware Nathan Ancell was a co-founder of Ethan Allen, a visionary responsible for pioneering the concept of selling furniture in room settings. Far from being a down-and-out old timer, Nathan Ancell was rich, very rich.

Only after I confided my blunder to Gilda did she inform me that she had been to his home and it was spectacular.

That old saying is true...you can’t judge a book by its cover.


Penney for Their Thoughts: The last time JC Penney made a bold corner office move, as it did earlier this week naming Apple’s Ron Johnson their incoming chief executive as of Nov. 1, I was very much a part of it.

Penney’s problems today resemble those it had in the late 20th century. It was a muddled, middle of the road department store, with little to entice shoppers to walk its aisles, unless they were headed to a bathroom or to their car. Penney’s senior management were nice guys, but not really up to the task of making the retailer a meaningful shopping destination.

In April 1998 I wrote in my magazine, “Something radical must be done. Penney needs to break the mold of inbred succession it has clung to since James Cash Penney retired if it wants to make serious headway with its department store strategy.

“I nominate Allen Questrom.”

Questrom was the former ceo of Federated Department Stores. He had merged it with R.H. Macy. He was a merchandising wizard with strong people skills.

Penney’s board of directors discussed my suggestion at its next meeting, but nothing happened, until July 2000, when Penney named Questrom its next chairman and ceo. Everyone in the press clamored for an interview; when Questrom was shown a copy of my April 1998 editorial, he granted me the first one.

Questrom left Penney in 2004, replaced by Myron “Mike” Ullman. Ullman had been chairman and ceo of Macy and other high-end retailers, but his expertise was in finance. Penney initiated some strong cross-merchandising agreements with companies like Sephora under Ullman, but has not been able to have any sustained breakout ideas. It also suffered as its core middle and working class clientele pulled back spending during the recession.

There’s no doubt Johnson is the fair-haired executive in retailing. Apple stores scoop up an estimated $4,000 in sales per square foot. Penney, by comparison, does under $160.

It would be presumptuous to believe Johnson could jump-start Penney’s performance based on his Apple experience. For one, the product lines are too dissimilar. Apple has a limited number of stock keeping units (SKUs) vs. the wide assortments at Penney. Apple’s SKUs are rather pricey compared to underwear, socks, or a men’s suit or dress. Apple stores are an electronics playground, visited by dedicated, some might say, brainwashed, customers and would-be acolytes, with lots of committed, helpful staff in a small store format. Penney’s stores are huge. Staff is there mostly to replenish stock and straighten up, not sell, for there are few customers who need help picking out a set of towels or a prom dress.

Despite being sold at full price, the uniqueness of Apple products—the iPad, iPod, iPhone, iTouch, MacBook—draws shoppers into Apple stores. While other retailers in a mall are almost empty, even in midweek Apple stores are abuzz with activity. Penney might have unique merchandise as well, but its private label apparel and home goods must compete with name and designer brands often sold at a discount in countless stores in the mall and strip centers.

Johnson’s challenge will be to sprinkle into the mix enough products that are exclusive to Penney and create excitement around them. It’s not his Apple experience that will serve him well here, but rather his time as head of merchandising for Target. Just as Target has a cult-like following for its Michael Graves housewares and other trendy goods, Penney will have to undergo a transformation in the consumer’s mind.

Can it be done? Can Johnson do it? He’s probably among the few executives who could. But he’ll need help turning on the spending spigot. He’ll need an improved economy with stronger home sales. Until middle America starts spending again, Penney will just be treading water.