Feb 10

Here’s some unsolicited advice for Ron Johnson, the new CEO of J. C. Penney.  Mr. Johnson has announced sweeping changes in the way Penney’s will do business, building on his previous successes at Target and Apple. I think his basic plan is not just sound, but laudable. If he really wants to reinvent department-store retail, here’s three specific things he could do:

Have a public e-mail address.

His former boss and mentor, Steve Jobs, had the public e-mail address steve@apple.com, and the address was well-known to the world. Apple even publicized it on their website. What’s more, Jobs personally monitored the e-mail sent there, and was known to occasionally reply to customer messages. Johnson should do the same: let us mail ron@jcp.com with our feedback. Yes, there will be a lot of noise to go through. On the other hand, CEOs often find themselves isolated from reality behind layers of middle management; having a direct channel to one’s customers helps prevent this. It worked for Steve… and no one else in this retail space is doing it.

Find out when customers are leaving the store because you don’t have their size.

When I shop at department stores, I’m often disappointed to find that they don’t have the size I need in some garment. Most stores don’t do a great job of arranging product to make it easy to find the right size. Even when they do, it seems like they stock sizes based on some inscrutable nationwide formula, not local demand; otherwise, it wouldn’t seem like the local stores are always out of the same sizes!

Look, department-store customers are used to lassez-faire customer service at department stores: We’ve got what we’ve got on the floor, we don’t know what’s coming in next week, we don’t know nothing. If the right size isn’t there, customers just leave. It’s a missed sale… and there’s nothing to tell the retailer “you would have made a sale if you had stocked more of size X.”

Penney’s will make more sales if they have the right sizes. They’ll get more customer traffic if they feel confident the store will have their sizes. You’ll gain customer trust and loyalty if they know you will have their sizes.

The store should figure out some easy way for customers to tell you “I would have bought this item if you had it in this size,” and promote the hell out of it.

Leverage logistics for the customer.

Look, we all know that retailers live and die by logistics and inventory. Penney’s has to know how many items they have in the store, of each type and size. In this day and age, it’s all computerized, and it should be easy to tell how many size-L red men’s cable-knit sweaters you have in the store… and in other stores. If they don’t already have this capability, I’d be astonished.

So, if I come up to a salesperson wishing that the store had that sweater in stock, I should never hear “I’m sorry, we don’t have any” as the sole response. Leverage your logistics; the salesperson should be able to whip out their iPod Touch with its barcode scanner, scan the shelf label, and tell me: “Oh, I’m sorry we’re out of that. I’ve noted that you were looking for it, so we can have more items like that in your size in the future. I see we’re expecting another shipment of this item on Thursday. I can hold one for you, if you’d like. I see our store in Poughkeepsie has two in stock today; I could also call down there and ask them to hold one for you.” (Bonus points: “Or I can have them put one on the truck tonight; it’ll be here tomorrow after noon.”)

This would delight customers, and it shouldn’t cost much—especially if Johnson has any plans to roll out portable-device checkout like he did at the Apple Store. Few stores go this far for the customer nowadays… but I know it used to be standard practice for Penney’s competitors, and that was back when it meant calling the other stores and waiting for someone to check the floor display.

Feb 06

Many years ago, I remember watching the PBS cooking show The Frugal Gourmet as a child, and being enlightened by the host’s explanation of the term “frugal.” Sadly, most people don’t seem to understand the difference, and confuse being frugal with being cheap.

A frugal person seeks to buy things with the most utility for the least cost of ownership. A cheap person seeks to buy things with the least initial cost possible.

Jeff Smith, the host of The Frugal Gourmet, illustrated the difference using meat pounders. One choice was a nice, stainless-steel pounder with an elegant design and some nice artistic flourishes. This pounder was by no means cheap, but was it frugal? No, because it cost more than equivalent tools that would do the job just as well. On the other end of the spectrum was a short length of two-by-four pine stud. This could also be used to pound out a cutlet, and it was undoubtedly inexpensive. However, it was clumsy to use. It was inefficient at the task; it tended to give both the user and the meal splinters, and it was difficult to clean properly. In short, it was cheap. The frugal option was a wooden mallet, of the type you could buy in any hardware store. It was inexpensive, it did the job well, and its finish allowed for easy cleaning. It cost more than the two-by-four, but the cost of using it was lower.

There was a time where being “fiscally conservative”, in the American political sense, meant that one was frugal. A frugal person doesn’t want the cheapest thing; they want the best value for their money. They want something that will last a reasonable time, that doesn’t incur additional costs in its use, yet has no unnecessary bits that run up the price. A frugal person understands that “costs” are not just monetary; wasted time and wasted effort are costs, as well, and need to be factored in. I believe that the term “fiscally conservative” has increasingly shifted away from “frugal” and towards “cheap.” That’s regrettable, because a cheap person usually winds up paying more over time than a frugal one.

I can walk into the local mall and buy a dress shirt at Macy’s for about $30, provided I make sure that the shirt is on sale. (It’s rare that they aren’t.) I can go further out of my way and buy a dress shirt from Brooks Brothers for about $78—less if I buy from their factory outlet, and use the discount card provided through my company’s associate-discount program. A cheap person would consider me crazy for buying the Brooks Brothers shirt. A frugal person would ask: How well are they made, and how long do they last?

My experience with the shirts Macy’s sells is that they are poorly made. It’s rare to buy one that doesn’t have ragged stitching. There are often visible flaws in the stitching. On patterned shirts, the alignment of the panels is haphazard at best. The fabric is often coarse and unpleasant to wear. The collar stays are cheap material that curls or breaks quickly. Most of all, the shirts wear out within a year to 18 months.

Brooks Brothers shirts, on the other hand, are very well made. Rarely, if ever, do I find a stitching error—even on their “factory second” shirts from their factory outlet stores. The material is high-quality, and properly aligned. The collar stays are sturdy and resilient. With proper care, I can get three years out of a Brooks Brothers shirt.

One year for $30, or three years for $78. I come out ahead with the more expensive shirt… and I feel better and look better doing it. That’s the frugal choice. By spending a little bit more, I get a better value for my money. It may mean that I have to plan my purchases more carefully to afford the initial expense, but because I get a better bargain in the long run by doing it, it’s worth it.

The opposite end of the spectrum, the truly cheap option, would be to buy a shirt at Walmart. While the Macy’s shirt is not particularly good, Walmart is well-known for squeezing their vendors to provide the cheapest possible product. The president of Snapper, the lawnmower company, famously told how Walmart’s purchasing agents tried to convince him to make a flimsy, cheap mower for the store (and tarnish his brand in so doing) because the Walmart shopper wanted a “disposable” mower that was cheap enough to discard instead of maintaining. Sometimes you can buy a product that appears identical to one sold elsewhere, including the model number, but the Walmart version is cheaper because it’s missing features that you would have gotten if you’d purchased elsewhere. Cheap, but perhaps the exact opposite of frugal. Much of what Walmart sells, in my opinion, is similarly disposable.

On some level, people realize this; there’s at least one academic paper showing that people perceive goods sold at Walmart as inferior. Yet, rather than save to buy what they perceive to be a superior product… they’ll go to Walmart. Does it really help that you can “afford” the GE microwave at Walmart when it breaks quickly and cannot be repaired because Walmart required GE to use inferior parts that aren’t available as replacement components?

Americans have bought into the cheap lifestyle. Yes, there is a place for cheap: many “consumable goods” are a place to economize by buying based on cheapest upfront cost. These are things that are inherently used up as you use them, like toothpaste or food. Unfortunately, this attitude has spread to “durable goods” as well: furniture, computers, appliances, clothing, cars, homes. We call them “durable” goods because they should last. They may occasionally need repairs, but they should be minor, as these are things that can be made durable—resistant to wearing out, long-lasting.

How does your company requisition durable goods? Do you evaluate suppliers to find the most frugal option, the one that will have the most benefit on your workers’ productivity given the combined cost of purchase and maintenance over the projected life of the item? Or do you just find the cheapest quote for something that meets the minimum requirements on the day it’s purchased? In my experience, most medium-to-large American companies choose cheap, not frugal.

Learn the ways of frugality and apply them to your own life. Spend a little more where it will give you better value; go without or spend less in other areas where you will lose less value to compensate. Encourage frugal thinking, at home and at work. Write to your legislators, and ask them to use your taxes frugally, not cheaply; you want value for that money!

Frugal should be a core American value. Let’s make it one.

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