Darlene Quinn

Author’s Note (Excerpt form Twisted Webs)

What has happened to my favorite department store? and Shopping used to be a lot more fun are laments that can be heard from coast to coast. According to a survey of American buyers, published in The Wall Street Journal more than a decade ago, shopping has become such an unpleasant experience that people hate browsing in stores more than doing household chores.

The ordeal of making a purchase, along with the disappearance of many (or in some cases, most) of their favorite shopping destinations, has consumers too stressed to enjoy shopping. In the past, department stores provided an escape from the everyday pressures of life. When customers must endure clogged elevators and escalators, low-quality merchandise, sky-high prices, and uninformed and unmotivated sales help, however, the magic vanishes.

The days of “shop till you drop” are over. With the advent of the special midnight openings, early-bird discounts, and all other sorts of sales, the magic of the “after-Christmas sale” has evaporated. The shopping environment and mentality has significantly altered. Today, you are far more likely to hear people from all economic levels talking about how much they saved rather than how much they spent.

Beginning in the fourth quarter of 2007, as the longest recession in the history of the United States unfolded, we saw not only mom-and  pop retailers but large national chains go down or shutter thousands of locations around the country. Big chains such as Circuit City, Linens ’n Things, and Mervyn’s declared bankruptcy. Then, unable to come up with money to restructure, liquidation was their only alternative. But it was more than the recent economic climate that caused many of these closures. That train started moving toward disaster more than two decades ago.

The environment of perpetual sales, which began in the mid-1970s as department store merchants fought to gain or retain their share of the market, brought about a new shopping climate. While consumers were finding lower prices, retailers were losing profit and therefore became ripe for hostile takeovers by predatory corporate raiders. In the wake of these leveraged buyouts, many retail organizations were left heavily in debt. Those that were unable to come up with fresh capital were forced to liquidate or to close a number of locations.

However, I see light at the end of this long, dark tunnel. At the end of 2009, Federal Reserve chairman Ben Bernanke announced that the recession was already over and that recovery was just around the corner. What does this mean? Things are less bad than they were. However, some very specific things have to take place in order for retailers to put their recession woes behind them. This is not going to happen overnight. It will be a long, slow recovery. Things may not completely fall in place for some time to come.

To recover from the bloodbath of the past few years, the first thing we needed to do was to begin posting gains again—not huge gains, but gains of some kind. We couldn’t move forward until we were able to stop the bleeding. We accomplished that in the fourth quarter of 2009. Christmas of that year was better than expected. Many sectors beat Wall Street’s predications, which helped the nation’s retailers turn the corner. It was the biggest December gain since 2006, and the best monthly showing since April 2008.

All this bodes well for our economic recovery, which depends heavily on a revival in consumer spending—seventy percent of our economy is based on retail sales. Although the gains were not as high as most retailers desired, currently we are off the critical list—for the most part. For true recovery to be imminent, consumer confidence must be restored, and the “value” shopper must reemerge from the discount stores and head back to the department stores.

In the world of retail, there are essentially three kinds of consumers:

1. There are price shoppers, whose primary concern is the cost of goods. They are typically middle-to-lower-middle-class, blue-collar consumers who have tight budgets, so they tend to shop at big-box discount stores like Walmart, Costco, and Target.

2. At the other extreme are luxury shoppers, who have money regardless of the economic conditions. They summer in the Hamptons, buy a new automobile each year, and are willing to pay for luxury in both goods and services. However, in our present economy, even these consumers are buying differently, since it is now somewhat gauche to be a conspicuous spender.

3. In the middle is the value shopper, who is typically middle to upper-middle class. This consumer doesn’t mind paying a few extra dollars for extra service and better quality. But during the Great Recession that began in the fourth quarter of 2007, value shoppers became price shoppers. They fled the mall department stores so they could push a cart at Walmart or Target instead. What is on the horizon for our traditional upscale department stores? Has the influx of big-box discount stores, the rise of the Internet, and the increase in mail-order catalogs turned them into so-called dinosaurs? Are they now irrelevant in the current environment and thus candidates for extinction?

My answer to that question is a resounding NO. Not by a long shot. New store openings, which were put on hold during the recession, are now underway or on the drawing board for the not-too-distant future. Among those opening new stores are Nordstrom, Bloomingdale’s, Belk, and Saks Fifth Avenue. At a more moderate level is Forever 21, which has done well by offering low-priced, trendy merchandise and has moved into some of the big box locations vacated by other retailers. Kohl’s also has several new stores scheduled to open in the near future. Since it is less expensive to remodel than to build from the ground up, Kohl’s is taking advantage of some of the turnkey locations left by big-box closures.

We have all played a part in the demise of our favorite department stores, and we will continue to play a part in their future. Faced with the post-recession, pre-recovery shopping landscape, retailers have been forced to cut costs everywhere they can. Most of the stores that survived the mass closings of 2009 have fewer staff and less of a selection. Managers have cut down on excess inventory in order to lower operating costs, and they have raised the bar on their everyday pricing. Savvy retailers are in tune with the fact that all the high-low pricing has driven consumer confidence to an all-time low—and they are armed to meet that challenge.

At this point, knowing the obstacles the retail community must overcome, I can only wish I had a crystal ball. Since department stores cater more to consumer desires than to tangible needs, management must retain the loyalty of these patrons or motivate them to return. To accomplish this they must provide quality, service, and value. The conundrum remains no different than in the 1980s when I was on the management team of the Bullocks Wilshire Specialty Department Stores in Southern California— actually, no different than it has been since the evolution of department stores in the mid-1850s. To put it simply, department stores must provide excellent service. To provide service, they must have a sufficient staff of knowledgeable, well-motivated sales associates. To provide an adequate sales staff, they must generate enough store traffic to pay for that staff and, if they are to survive, to provide profit to their shareholders.

I have worked with the CEO of the largest conglomerate of department stores in the United States. I know for a fact that his number one priority is customer service. You can often find this man popping into one or more of his locations unannounced to observe everyday customer service—the look of the department, the level of service, cleanliness, etc. He retains the unique management style we enjoyed at Bullock’s/Bullocks Wilshire, which includes selecting the very best executives, empowering them to do their job in their own way, and giving them one hundred percent accountability. You may be surprised to learn that this man is the CEO of Macy’s, Inc. (previously Federated Department Stores).

Macy’s, I have found, is a store that people either love or hate, depending on their orientation. If you’ve lived in Manhattan, or you think of the Thanksgiving Day Parade or Miracle on 34th Street, you are most likely a fan. If, on the other hand, you lost your favorite store, the one you grew up with and have a strong relationship with, you are not likely to be fond of Macy’s, which in recent decades has replaced many of these local stores. When I mention customer service as the number-one priority, your personal experience—wandering around in one of that store’s locations, unable to find someone to ring up your sale—may tell you that it just isn’t so. Remember that with more than eight hundred locations, accomplishing excellent service and also bringing profit to the bottom line is a whale of a task. Although I do not happen to be a regular Macy’s customer, and I know the organization has fallen short of its goal, from what I’ve seen and what I’ve heard among the various groups that I’ve spoken with recently, it is making significant inroads.

Store management at Nordstrom report that this organization, too, has reduced expenses to the bone, but it also has kept customer service as the number-one priority—a goal shared by all our surviving traditional department stores—a goal that is not optional.

I am often asked, “What can shoppers do to prevent their favorite stores from closing? Is it as simple as buying more stuff, or can they appeal to senior management?” Although my view into the future is not crystal clear, my advice for those of you who enjoy the ambience of quality department stores is to refuse to abandon your favorite store. If the merchandise selection or service is not what you expect, don’t just walk away. Get in touch with store management. Even if this store is now a part of a large conglomerate, they desire and depend upon your feedback to maintain or improve their customer service. They certainly do not want a negative incident with an uninformed or unmotivated sales associate to color your perception of the entire store.

As I mentioned, from coast to coast I’ve heard a cry for the return of our favorite department stores, which translates to the return of excellent service, quality merchandise, selection, and exciting merchandise displays. In 2006, when the Macy’s name was placed on Chicago icon Marshall Field’s, the patrons of that store did more than complain about it. They gathered 9,800 names on petitions, demanding that their name be restored. They continue to wear buttons, hand out flyers, go to stockholders’ meetings, run a website, and hold midnight vigils. While Macy’s is known nationwide (and I certainly understand the importance of branding), in my opinion, changing the name of this significant landmark was a big mistake—one that has cost Macy’s an approximate thirty percent of its profit in the Chicago area. The protesters are still going strong and gaining momentum. They do not appear to be giving up. They want Marshall Field’s to come back, and they believe that it can. Whether they will be successful or not, only time will tell.

On a brighter note, department store retailers are resilient. They weathered the Great Depression and a number of recessions prior to the one from which, as this book goes to print, we are now emerging. They were actually more prepared for our recent recession than they were in 1991. They responded more quickly in cutting expenses and reducing inventories. It appears that the majority of our top retailers have regrouped and are meeting the challenges ahead. If you feel that the day of department stores are a thing of the past, check out some of the malls and see how difficult it is to find a parking space, or if you’re an upscale customer, just walk into Bloomingdale’s on one of that store’s Insider Days. You’ll see a full parking lot and patrons walking out with their arms loaded and smiles on their faces.

The need and desire for quality department stores has not been replaced. The rapidly growing Internet (which surprisingly accounts for less than eight percent of total retail spending in this country), mail-order catalogs, and the big-box discount stores are now a part of our retail world. However, they fall short of filling the needs of a large portion of our population.

The department store is here to stay. It will be what we make of it.

What Are The Three Types of Consumers?

Expert Explains Why Price-Based Marketing Can Hurt Retailers, Manufacturers

It’s always the simple equations that turn out to be more complex than they seem.

In the mass consumer marketplace, competition is king and the hunt for competitive advantage can be as creative and dynamic as the marketplace has ideas. But when a recession hits, and consumers can no longer afford the luxuries of life, the marketplace’s initial reaction is to sing a single song — low price.

It’s a logical reaction, because the primary assumption is that consumers with less disposable income will be forced to make buying decisions based on what they can afford and not what they want. For retailers and manufacturers, margins get slashed and what profits are left are as slim as the Olsen twins on a diet.

But what happens when the recession is over? There’s the rub, and to avoid it rubbing out future profits, it’s important to understand the three types of shoppers and why they exist.

Price Shopper — This is the lowest common denominator in the marketplace, and typically represents the plurality of shoppers. These are families, young single people just out of school with loans to pay off, or high school graduates getting by on “name-tag” jobs. They are on tight budgets, and have no problem buying generic vegetables in a can than fresh greens from the produce section. They need the basics, and they need them for less, so they can make ends meet. The low price is king for them, because they don’t make too many impulse or luxury purchases. They need the primary commodities of life, and they pay commodity prices.

Luxury Shoppers — It’s nice not to worry about money, and that’s why retailers love these shoppers. They are a recession-proof demographic who want the best and have absolutely no problem paying for it. They like big ticket items and enjoy being early adopters, picking up the new iPhone 4 before all the bugs are worked out or trying the newest plasma screen TV based on the fact their neighbors got it, and boy did it look cool. These shoppers are very brand loyal once they find a brand that is high in quality and reliable. If they buy a car from a specific manufacturer, and they fall in love with the car, they will buy every subsequent vehicle from the same manufacturer and dealer — that is, until they are given a lemon. They are absolutely uncompromising and are the most difficult to please, but the most rewarding when they get the products and services they want the way they want them. You can’t really market too much to them, because from their perspective, the quality items will rise like cream to the top. They can’t be sold a pig in a poke. The only message that resonates with them is quality. Now, a few of them did migrate to some of the “price shopper” retailers during the recession, but for some, it was more of a curiosity than a change of habits. They may frequent a big box store from time to time, because one of the best strategies for staying wealthy is to save money once you have it — but quality of life is paramount with this buyer.

Value Shopper — This shopper likes a bargain, but not necessarily at the cost of quality. They don’t mind spending a few extra dollars to get a better value from their purchases. These are families who don’t mind generic paper towels or off-brand spaghetti sauce, as long as they can buy better cuts or meat and some fresh produce. They would rather spend $100 on a pair of well-made, brand-name running shoes that will last for years than $12 dollars on cheap knock-offs that fall apart after three months. These shoppers are the X-Factor. They sit in the middle of the consumer retail paradigm, and they migrate back and forth between being price shoppers and luxury shoppers. Not too many price shoppers become luxury shoppers, unless an inheritance or a winning lottery ticket is involved. Subsequently, most luxury shoppers don’t downgrade their status, unless there is a federal indictment or SEC violations in the mix. So, the fulcrum of the consumer marketplace — and the economy as a whole — is the value shopper. The more who shift downwards, the harder it is on the retail business. The more who shift upward, the better it is for retailers. Moreover, the economy and consumer confidence always improve when a goodly number of price shoppers migrate upward to the ranks of being value shoppers.

That’s why it is so important for manufacturers and retailers to begin focusing on the value consumer, and as soon as possible, lest they risk allowing their particular category of products to be completely commoditized. In order for the retail marketplace to share in the recovery, and move it forward faster, making an appeal to the value shopper should be priority number one. Quality is becoming more and more important to all three shopper categories, if for any other reason, people are getting weary of lesser quality products. After a while, people know the difference, and they understand the value of the higher priced products they couldn’t afford before. More importantly, the regrowth of the ranks of the value shopper will begin to realign profit margins with pre-recession levels, making growth easier to achieve than before.

As stagnant as the price shopper and the luxury shoppers can be with regard to their buying habits, that’s how dynamic the value shopper can be — if they are properly motivated by a marketplace that is working to serve their needs.

August, 2010

Why Wal-Mart Blinked And How Consumers Got Them to Change Their Tune

How Wal-Mart is Correcting the Mistake That Led to Their First Quarterly Drop in Company History

Earlier this year, Wal-Mart posted its first drop in customer traffic and revenue in the company’s history, and it was all because the largest retailer on the planet got just a little greedy, according to one industry insider.

Late last year, an initiative began to promote the retailer’s in-house store brand of grocery products, called Great Value,” said Darlene Quinn, a former senior executive with the Bullocks Wilshire department store chain and author of the novel Webs of Power from Emerald Book Company (www.darlenequinn.net). “Store brands are nothing new to supermarkets, as every store makes use of them. These are typically products that are manufactured and packaged in the same facilities that make name brand products like Kraft, Arm and Hammer, Hefty and others. The retailer can price them lower than their name-brand counterparts, but they make more money on them because they own the product lines. It’s a win-win for the store and the consumers who choose those generics over comparable name brand items.”

Wal-Mart’s hiccup occurred when the retailer, in an effort to increase sales on their store brands, began eliminating comparable name brand items from their shelves late last year. When they wiped more than 300 familiar products off their shelves, something unexpected happened — many shoppers began buying groceries elsewhere, Quinn said.

“The prevailing wisdom seemed sound,” she said. “With a harsh economy and high unemployment, it would seem logical that price would be the primary consideration for consumers. After the shift on the shelves took place, shoppers conversely decided that they would rather pay more for groceries in order to bring home the brands their families preferred than switch to the generic at Wal-Mart. So, they left, and in far greater numbers than Wal-Mart ever anticipated.”

According to Kantar Retail-Management Ventures Inc. and Advertising Age Magazine research, Wal-Mart’s sales growth fell by 2 percent, while all its key competitors — Target, Kmart, Kroger, Costco, Family Dollar, Dollar Tree and Dollar General — all posted gains. Kmart, which was down 5. 4 percent in 2009, gained 1.7 percent in 2010, charting a 5.3 percent swing.

As a result, Wal-Mart began restoring many previously cut name brands to their stores, with Arm and Hammer and Hefty products, among many others, reappearing on Wal-Mart shelves in April.

“In my mind, there really was no need for Wal-Mart to make the change,” she said. “I think they just got a little greedy. They are the 800 pound gorilla, so they thought they’d throw their weight around a little to chart better profit performance. What they discovered is that the real 800 pound gorilla is the consumer. Despite Wal-Mart’s market dominance, consumers are the ones with the dollars, and they vote with those dollars far more often than retailers think.”

May, 2010

How to Beat the High Price – No Selection Shopping Blues

Retail Expert Reveals How Ship-to-Store Options Save Time and Money

Shopping used to be a lot more fun.

At least, that’s what Darlene Quinn thinks. A former senior executive with the Bullocks Wilshire department store chain and author of the novel Webs of Power from Emerald Book Company (www.darlenequinn.net), Darlene is a super shopper who knows the retail industry from the inside out and sees the trends before shoppers do.

“In the post-recession, pre-recovery shopping landscape, retailers are cutting costs everywhere they can,” she said. “The stores that survived the mass closings of 2009 now have fewer staff and less selection. Managers have cut down on excess inventory in order to lower operating costs, and they have raised the bar on their every day pricing. With the perpetual sales environment which began in the eighties as department store merchants fought to gain or retain their share of market, they trained consumers not to pay retail prices but to wait for the big sales. In the aftermath of all the high-low pricing, consumers no longer know the value of merchandise. If you can buy something for 70 percent off, what is the real worth?”

However, some large retail stores like Sears and JC Penney, as well as big box retailers like Wal-Mart and Target, introduced a new service last year that actually beats both the pricing and selection dilemmas. Ship-to-store is a feature on many store retail web sites that allows shoppers to make purchases online at lower prices than are available at the store locations, and have them shipped free to the local store of their choice. When the product arrives at their neighborhood store, they are notified and they pick it up.

“With this new feature, the stores offer a vastly superior selection of items compared to what they can afford to stock on their store shelves,” Quinn said. “They also can offer dramatically lower prices online, because web-based sales don’t incur as many costs as the products stores buy and shelve in their brick and mortar store locations.”

For the value shopper—those who are willing to pay a little more for better quality and service there are the Upscale Department Stores such as Macy’s, Nordstrom’s, Bloomingdale’s and Saks. While they are also in the mail order business (on-line and in catalogues), they do not offer the ship to store option, they do offer free shipping for orders over a specific dollar amount, and merchandise can be returned in their store locations, however, Quinn said their focus is different, and not based strictly on price, but rather on quality and service.

“Since the majority of merchandise sold in upscale department stores is purchased to fill the consumers’ wants rather than actual needs, they are dependent upon creating a strong desire, and cater to their patrons who shop with them regularly and use their own credit card of a Visa or Master card that bears the store name,” she added. “In talking with several retail executives about their plans in this economy, it’s become clear that customer service is the top priority across the board with the upscale department store. For example, Nordstrom has reduced expense significantly, but has kept customer service as the number one priority. With 800-plus stores, Macy’s whose number one priority is also customer service has fallen short of their goal. But new programs have been implemented for bringing service back into the individual locations. For example, Bloomingdale’s has initiated an insider’s rewards program. Along with advanced notices of sales, four $25 dollar discount coupons, and at the day patrons are given a gift certificate of $15 for every $100 they have spent during the special insider days. That’s not only an incentive but real customer service.”

February, 2010

Who’s Closing Now? Expert Reveals Retailers on the Rocks

Topic Summary

It started with upscale brands like Eddie Bauer and Pier One Imports, but now the wave of retail closings is hitting mainstream retailers that are a part of Americans’ daily lives – JoAnn Fabrics, WaldenBooks, Rite Aid Pharmacies, Advance Auto Parts, Whataburger, Advance America Cash Advance Centers and PacSun to name just a few. Their demise didn’t start with the recession, however, according to Darlene Quinn, a former senior executive with the Brooks Wilshire department store chain and author of the novel Webs of Power, from Emerald Book Company (www.darlenequinn.net). Quinn was there when corporate raiders started consolidating the big chain stores and siphoning them dry. Quinn knows the inner workings of senior retail chain management, and has a unique insight to how the industry has found itself sitting on the ledge, looking down.

Discussion Topics

• What chains are closing locations, and which ones are closing altogether?
• Which ones are on the bubble, and on the verge of closing more stores?
• What led them to this situation? Is it just the rise of Wal Mart, or is there  something more?
• What can shoppers do to prevent their favorite stores from closing? Is it as  simple as buy more stuff, or can they appeal to senior management?
• What is the chilling effect on the retail industry when giants like this fall?
• Like the banking industry, are the heads of these chains now rewarding  themselves with bonuses for their failure?
• Is there anything on the horizon that could turn the situation around for  any of the major chains?

Topic Summary

Darlene Quinn has seen the inside of the retail chain boardroom, and she has witnessed the demise of major chains like Marshall Fields firsthand, so she saw the recent spate of retail closings coming a few miles away.

“Many of our favorite department stores are vanishing,” Quinn said.  “While the predatory, corporate raiders got the ball rolling through hostile takeovers in the 80’s, we are all, in part, responsible for their demise.”

The train started moving toward disaster nearly 20 years ago with a wave of leveraged buyouts in the retail sector that led to a great number of popular chains being owned by a smaller number of conglomerates and holding companies, Quinn added.

Here’s a list of the most recently announced retailers who are closing stores, reducing their number of locations, or just flat out closing altogether.

• JoAnn Fabrics • WaldenBooks • Rite Aid Pharmacies • Advance Auto Parts • Whataburger • Advance America Cash Advance Centers • PacSun • Ann Taylor • J. Jill • Sears • Ruehl Stores

• Chrysler Dealerships • Boater’s World • Jones Apparel • Home Depot Expo Design Centers • Starbuck’s • Pier One Imports • Macy’s • Zales Jewelers • American Greetings

 “The buyouts in the 80’s allowed corporate raiders to swoop down on businesses (many of which they knew little or nothing about) purchase them, using mostly Other People’s Money, and drive them into chapter 11,” she said. “In many cases, the raiders cared little about the businesses they were taking over. The business of America became the taking over of business. The goal was not to grow these businesses; the goal was to line their own pockets.”

Department Stores of the 1980

Questions regarding our vanishing department stores continue to echo from coast to coast, while their future is still being written upon the American scene.

By the late 70’s through the mid-80’s, many reputable, well-established department store conglomerates began to go under. The eighties marked the beginning of great change in our future shopping options and experiences. Many existing malls were renovated. They tended to cater to two extremes—upscale and discount malls. Renovated malls and several well-know department store chains catered to a more affluent clientele.

It seemed that the major business in America became the taking over of businesses in the decade of the 80’s. Larger department store conglomerates began to acquire stand-alone department stores, and entire department store conglomerates fell victim to hostile takeovers. Many department store chains experienced hard times as local or regional chains were bought by investors. The debts incurred in these buyouts proved disastrous for many well-known department stores. Financial problems, combined with a consumer propensity for buying merchandise only after several markdowns, caused large losses to retailers. In efforts to cut expenses and improve their bottom-line, department stores, as well as other major industries, across the nation were swept-up in the phenomenon of down-sizing. Reductions in staff were most notable in our department stores, where consumers had come to expect good service. As a result of down-sizing, takeovers, and store closures, department store employment grew at only half the average rate of other industries. However, due to the large number of individuals employed in department stores, the industry was among the top thirty employers of the 1980’s.

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The World of Department Stores

The Way They Were—The Way They Are

The wave of downsizing, hostile takeovers, and mergers has left an indelible mark on the world of department stores. From coast to coast, many of us mourn the end of the era—the loss of the unique department stores we’ve know and loved. Others embrace change and look forward to new opportunities.

The rise of department stores in the mid-1850s was a major phenomenon, and has played a prominent role in all of our lives, not only for business but also for society.

Many historians credit the department store for liberating women by creating jobs and opening new career opportunities for them. Department stores changed society’s values, making it acceptable for women to shop on their own. Department stores provided a window on the world and a valuable meeting space for women.

Department Store have faced and met, head-on, numerous challenges throughout the decades. In the 1940s, with war rationing and supply problems, buyers were cut off from the fashion houses of Paris. They met that challenge by keeping stocks low, selling goods quickly, and convincing customers that they wanted what was offered for sale. At the same time, they began aggressively promoting American designers and turned to Hollywood for inspiration. Casual dressing was introduced. By 1945, business again boomed. Consumer demands skyrocketed with the postwar baby boom, but as families moved to the suburbs, traffic clogged city streets and people preferred to shop closer to home. Parking in the cities was an overwhelming problem.

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