Tagged : experience

“A great department store… if it was 1995”

“They toured me through some of the ‘new’ JC Penney stores. I closed my eyes and realized this is a great department store… if it was 1995.” It’s a pretty bad thing to say about a store. And it’s not just anybody who said this. No, it’s JC Penney’s own CEO, Ron Johnson.

I guess things must be really bad when your CEO says these kinds of things about your own company. This leaves me with two questions. 1) Who is this guy and 2) what should a great department store look like?

1) Who is Ron Johnson?

He’s the guy who pioneered the concept of the Apple Store and the Genius Bar at Apple. Under Johnson’s direction, Apple’s retail stores achieved a record level of growth, exceeding a billion dollars in annual sales within two years of their debut. Last year, he left Apple to join JC Penney, a US department store, as its new CEO. He wants to achieve the same with JC Penney as he did with Apple.

I think it’s safe to assume this guy knows something about business and retail. And, more importantly, he knows what to do in order to turn JC Penney into a great modern department store. That leaves us with question two.

2. What does a great department store look like?

Huge assortments and one-stop shopping – Many ‘experts’ are confident the current retail model is broken. Physical stores will be replaced by online versions. Within years, all we do is shop online. Jonson disagrees. He quickly points out people thought the same when Apple launched the Apple Store. Which turned out not to be the case.

Physical stores are still the primary way people acquire merchandise, and he thinks that will be true 50 years from now. Ron Johnson sees no reason why department stores can’t flourish. They can be people’s favorite place to shop. They’ve got all these strategic advantages like the lowest cost of real estate, exceptional access to merchandise and scale to create enormous marketing power. Besides, people like stores with huge assortments and one-stop shopping. It’s just the way departments stores look, their lack of imagination and the way they engage customers.

Specialty stores – When people want a great product, they visit specialty stores like H&M, Nike or Zara. Shoppers are done with wading through “an endless sea of racks.” This is not just true for JC Penney. It’s a larger industry trend. Based on research about American’s shopping habits, it’s clear that specialty stores work. “In a world where the product we want is just a key-word search away, we’ve lost our tolerance for complexity,” Johnson said.

That’s why JC Penney’s plan includes creating 100 specialty stores within the department stores. The move expands on what Penney has already done, creating store-within-a-store areas where sales per square meter are three times higher than the average of the rest of Penney. Within four years, all department stores will be completely redone.

Main street and Town Square – The sea of outdated merchandising fixtures from the 1980’s will be replaced by a hundred specialty stores, essentially creating a small town. Just like any town, this means a street is needed. And that’s exactly what Ron Jonson created when he imagined the Main Street concept. Main Street will be the aisles that guide you around the store, passing all of these specialty stores. This Main Street showcases trend-right brands and so called experiences. The comparison with a local town doesn’t stop here. In the center of the store there will be a Town Square. What will this Town Square be? That’s still a secret. All we know is that Johnson said it contained “truly innovative thinking” and will be revealed in 2013.

Just like Apple

While analysts think these changes are a “revolutionary approach to retailing” and “it will have other retailers waking up,” I think you could have seen these changes coming months ago. Because this approach to retail is essentially the same as Ron Jonson did when he pioneered the Apple Stores a decade ago. And Johnson freely admits he’s ‘stealing’ Apple’s floor plans from its retail stores.

Apple stores are split in two, Johnson explained. The “Red Zone” is where customers discover new products and the “family room” is where returning customers come to learn something new or fix their products, like the Genius Bar. This obviously is very similar to the Main Street and Town Square concept he imagined for JC Penney.

“It seems like change takes place over night, but it really doesn’t,” Johnson said. “Something I learned while at Apple is ‘Every journey begins with just one step.'”

Did you know the staircases in Apple's flagship stores are made from glass just to encourage people to climb the stairs? Why?! Apple simply wants to increase traffic to the second floor, which is traditionally lower in retail stores than the ground floor.

— This is according to Ron Johnson. He pioneered the concept of the Apple Store in 2000. In 2011 he left Apple and became CEO at JC Penney.

Apple glass staircase

History, we know, is apt to repeat itself

Why does history continue to repeat itself? And, more importantly, why don’t we learn from the past to solve our current and future problems? It’s a question I ask myself regularly but find impossible to answer.

I wrote about putting the fun back into shopping and the end of the nightclub. In both cases history could solve a problem because it already happened in the past. Nonetheless, most people (in these cases retailers and nightclub owners) fail to learn from the past. They don’t see the solution, lack courage for big changes or hope their businesses won’t be affect by, let’s say, the rise of the Internet and/or economic crisis.

Even though I know (or believe) history repeats itself, I find it surprising to read articles which date back many years, but could be written today. Here’s an example. A couple of days ago I studied the phenomenon Niketown. At a certain moment, I came across an article describing the courage Nike had to open stores during a crisis. But the author wasn’t describing today’s economic crisis. He wrote the article twenty years ago. Nonetheless, the article remains so true, even today.

Because of the many similarities between their (Niketown) situation and the situation many retailers find themselves currently in, I want to share this 1992 article from CNN Money. It’s an interesting read. And pay attention to the last paragraph. Recently, a Dutch newspaper wrote about smaller Dutch cities having trouble attracting (a large number of) shoppers. Nike shows it’s possible to attract large numbers of shoppers despite being located in a ‘remote’ or ‘less-important’ city, in their case Portland.

Nike, it seems, is on to something. ”Today’s shoppers want to be entertained,” reports Madison Riley, a retail specialist for Atlanta-based management consultants Kurt Salmon Associates. ”Niketown is theater,” says Riley, ”and for retailers, that’s a key to the future.” Niketown is putting the fun back into shopping, and that, along with a commitment to first-rate service, is why it is our [CNN Money] Store of the Year.

Nike is bold in its timing and almost unique in its positioning: it has launched the store while the retail industry is faltering — U.S. retail sales have fallen from $186 a square foot in 1980 to $161 today — and showing no signs of rebounding. Most other retailers are offering consumers no-frills, find-it- yourself outlets or lookalike, cavernous concrete warehouse clubs. As with most fancy packages, though, this one carries a pretty price.

While athletic shoes and gear are widely discounted elsewhere, Niketown customers always pay full retail price. Nothing goes on sale — ever. Niketown is designed to dazzle you into paying $100 or so for athletic shoes, $120 for a nylon running jacket and $500 or more for a total ensemble that puts you in matching socks, pants, top and sweatband. ”Niketown combines the fun of Disneyland, the museum quality of the Smithsonian and the merchandising of Ralph Lauren,” announces Gordon Thompson, the store’s 31-year-old designer, who also worked on set ideas for the 1989 movie Back to the Future II.

There are signs that other retailers are following Nike’s lead. For example, outside Minneapolis, real estate developer Melvin Simon is building what will be the biggest shopping mall in the world — a combination entertainment and shopping center dubbed the Mall of America. Simon is betting that millions of shoppers every year will be pulled in by the pizazz.

Niketown’s popularity has been overwhelming, especially considering its location. ”Portland is not exactly the crossroads of the retail world,” quips Nike chairman and founder Philip Knight, 53. In the year since the store opened, an estimated 1 million people have shopped there.

You can read the entire article here.

mms-world-new-york

Put the fun back into shopping

“Today’s shoppers want to be entertained. Niketown is theater. And for retailers, that’s the key to the future”. You might think I pulled this quote out of a recent newspaper discussing the success of Niketown versus the trouble many retailers find themselves currently in.

Wrong.

It’s 20 years old. Back in 1992, it appeared in CNN Money. The article also mentioned: “Niketown is putting the fun back into shopping.” Nike is not the only company who realized the potential of a ‘store which entertains its shoppers’. Five years after the first Niketown, candy company M&M opened M&M’s World in Las Vegas. Currently, about 8 million people visit this Las Vegas store every year.

Several years later (2001), Apple opened their first Apple Store. In Apple’s own words: “The stores are designed to simplify and enhance the presentation and marketing of personal computing products.” Just as Niketown and M&M’s World, the Apple Store is a theater. A theater for shoppers.

The other day, I read an article about Dutch retailers struggling “because of the economic crisis”. People buy less. And when they do buy stuff, people tend to visit large well-known chain stores. Or shop online. Most retailers find it hard to compete with these large chain stores and the Internet. It’s hardly impossible to compete on price (they win). In order to survive, retailers need to find other ways of attracting customers.

Retailers should start (and win) the entertainment battle. Put the fun back into shopping. Turn stores into theaters, so to speak. Just like Nike, M&M and Apple did. These companies had tremendous success with it. So why don’t you?

The end of the nightclub

Last week Dutch news agencies reported within ten years nightclubs will have disappeared. This might come as a shock to many, but it makes total sense. According to research, it’s the financial crisis and smoking ban to blame. Nightclubs themselves can’t be blamed. It’s not their fault teenagers have less money to spend.

Wrong.

The primary function of nightclubs is (1) provide entertainment, (2) a place to hang out with friends and (3) meet new people. During the past years the way we’re entertained and hang out with people changed (think Facebook, Twitter). That is why nightclubs, if they don’t change, will disappear within years. They continue to lose relevance in our ever changing digital world. Instead of putting blame on others (financial crisis, smoking ban), they should review and change their business model. Which in turn will change the function of a nightclub all together.

Luckily for nightclubs, their situation is not unique. We could compare their situation with the music business or major television networks which both face a decline. Instead, I choose to compare nightclubs with movie theaters. They compare well on three important topics;

1. Main product (movie > DJ / live band)

2. Venue (movie theater > nightclub)

3. Technology (3D, large screen > powerful audio system, light shows)

Several years ago movie theaters struggled to stay open. Why pay money to watch a movie elswhere while you can watch it at home? People were not interested in leaving their house for just a bigger screen, which was essentially the only difference between home and a movie theater. Movie theaters had to change their business model. Which is what they did and continue to do.

1. Main product (movie)
Every movie theater needs a great product, which is the movie. Audiences are less interested in movies starring expensive actors. Instead, they are more interested in unique stories and/or a movie utilizing the most awesome technologies (think Avatar, Harry Potter, Alice in Wonderland, Toy Story 3).

2. Venue (movie theater)
According to George Lucas’ book Blockbusting, the most frequented theatrical venues were megaplexes averaging sixteen screens. “These megaplexes were destination locations complete with food courts, video games and shopping.” Why megaplexes? People demand choices. A wide choice of movies (“sixteen screens”), a wide choice of restaurants (“food courts”), et cetera. They don’t visit a movie theater for ‘just a movie’. They want the full package – On a side note, I won’t be surprised if “video games”, described in the book Blockbusting, will be replaced by social networking lounges – In essence, a movie theater turns in an entertainment venue with movies as their killer-app.

3. Technology (3D, IMAX)
2D no longer suffices. Most new movies are made in 3D. And screens are getting larger. IMAX, movie theaters with the largest screens, went mainstream. About ten new IMAX venues open every month. A movie in 3D and/or IMAX is an experience instead of ‘just a movie’.

As a result of this changed business model, moviegoing showed an increase in both box office returns and attendance. What can nightclubs learn from this development? Well, first of all it is important to acknowledge the fact people continue to love music and hang out together. Just as with movies, they still love the product. But this is no longer enough to attract people to visit nightclubs.

1 Nightclubs need to focus on a product everyone wants to see. Could be a famous DJ or unique live band. Without a great product, people won’t be interested in nightclubs. No matter what they try.

2 The venue needs to offer a full range of entertainment. Several dance floors, multiple bars, a restaurant, several lounge areas and maybe other functions, like a gym. Also some quiet areas (without music) are needed. Those areas feature comfortable sofa’s, a bar, free wifi and big tv’s.

3 It’s all about technology. Nightclubs should give their customers the most unique experience possible. Imagine a club with the biggest and/or most spectacular light show of the country, a fully lit dance floor or maybe a movie theater like auditorium but instead of chairs, there’s a dance floor or a restaurant. Imagine watching a movie while dancing or having dinner. How cool would that be!

Without changing the function of the nightclub, people won’t be interested in going there anymore. For club owners, the solution involves the complete package, ranging from product to venue to technology. And remember; it’s not about the music, meeting other people or about the drinks. It’s about the experience!