The More Things Change, Part II

Frank Dallahan, Publisher -- JCK Online, 1/1/2003 2:00:00 AM

Recent news stories about the woes of two major retailers caught my attention. One was about Jacobson's; the other was an article on Kmart's new efforts to emerge from Chapter 11. Both stories contain a valuable lesson for jewelers.

Jacobson's was a regional high-end specialty store that focused on ready-to-wear, home accessories, and jewelry. The company had stores in upscale locations in Michigan and Florida. Based on my own observation of their store in Boca Raton, Fla., as well as past experience in selling Jacobson's, they also had the clientele to match.

One analyst quoted by the news article believed Jacobson's failed because its buying became centralized to the point where individual stores failed to meet the unique style requirements of their local marketplaces.

Let's see. Do consumers in Jackson, Mich., have the same merchandise needs as the customers in Boca Raton? I don't think so. Perhaps a small core group of products would do well in both markets, but can you think of many apparel, home furnishings, or jewelry products that would?

The Oct. 15, 2002, issue of The Wall Street Journal had a story about Kmart's giving local managers the ability to serve their markets better by anticipating demand for products put on special rather than taking the obligatory allocations decided by the home office. Sales in test stores rose significantly as a result. Two major problems for Kmart have been a distribution system and buying structure that didn't provide for rapid replenishment of merchandise that was selling, and inadequate initial supplies of merchandise at the point of sale to support local advertising. According to the article, Kmart management is considering giving local store managers some decision-making role in inventory levels for products they stock.

The article also mentioned Wal-Mart's recognition of the importance of local differences in merchandise selection and inventory levels within a centralized system. The No. 1 retailer in America long ago recognized the importance of local say in merchandise selection and assortment.

The jewelry industry is virtually the only merchandise category where the independents equal or slightly surpass the majors in dollar volume. One reason is that they're closer to the customer. They listen better. They respond faster. Their merchandise carries, for the most part, the store's own brand name. They know more about the product: what it is, where it originates, how it's made, and—most important—how those features relate to benefits for the clientele.

A few months ago I wrote about the homogenization of retail, which leads to central control and loss of the ability to react to your customers. That principle applies equally to a thousand-store national chain, a hundred-store regional chain, a five-store local chain, and a single operation.

It's sad to read that a business fails because it couldn't—or wouldn't—adapt to its clientele's preferences. The lesson is clear: The people who know the clients and the market must be involved in choosing and managing the merchandise.

fdallahan@reedbusiness.com