Misleading Indicators
Marketing spends, store openings and headcounts were long seen as indicators of retailer and marketer health; the more they went up, the better everything was going. Now, they’ve become the next phase targets for driving less-is-more efficiency and agility, as many of the majors claim that they can cut and convert current resources without compromising their ambitious growth plans.
Revolving Doors
Retailers such as Macy’s-owned Bloomingdale’s and Abercrombie and Fitch are trading low-margin U.S. locations for better stateside digs and more lucrative overseas options, rather than layering onto their existing retail footprints. Abercrombie and Fitch shuttered 71 of its U.S. stores last year, and announced that another 180 are on the chopping block between now and 2015. As drastic as thereductions may seem, A&F’s total store count will decline less that 5%, thanks to its aggressive international expansion plans. Productivity in the remaining stores makes the picture even brighter – according to the company, the U.S. stores left standing are hitting margins that are in line with those of their international flagships.
Macy’s closure of several Macy’s and Bloomingdale’s locations in January was another shift-to-lift strategy, as new and replacement store openings were announced simultaneously with the closures. According to Macy’s CEO Terry Lundgren, the company is committed to managing a portfolio of stores that focuses on their “best and most productive locations.”
Marketing Mods
Bob McDonald, Chairman and CEO of brand marketing behemoth Proctor & Gamble, told analysts last week that the company will cut costs by $10 billion over the next five years, with $1 billion of this coming from external marketing spending. Engaging in what might seem like reckless behavior for a company steeped in brand marketing, P&G believes that it will actually enhance its one-to-one reach by shifting dollars to lower-cost digital marketing channels. Further efficiencies will be realized as it includes more of its brands in each marketing program, rather than relying on single-brand strategies. The company’s global “Thank you, Mom” 2012 Summer Olympics push, which features Pampers, Tide, Gillette, Pantene and other marquee P&G brands, is just such a program, and delivered more than 2.5 billion media impressions in the first month alone.
Ivan Wicksteed, newly-minted CMO of Cole Haan, has a vision for the 84-year-old brand that includes taking a scorched-earth approach to one of fashion’s marketing mainstays, print advertising. In Wicksteed’s words, he “pretty much killed the entire print budget” in his first week, redirecting it toward content development, social media and digital marketing. Wicksteed summed up the net result of this severe shift by saying that “It’s not a significant increase from last year; it’s just a different use.”
Walmart appears to be applying its productivity loop to more than just products. In the company’s fourth quarter earnings call on February 21st, CEO Bill Simon claimed to have reached more consumers through more channels during the holiday, while at the same time lowering the company’s overall advertising expenses for the year by 10%. Although digital wasn’t called out specifically, Walmart’s alliances with Facebook, its steady stream of tech acquisitions and the digital magic that it’s been cooking up at @walmartlabs certainly point to digital as a driver of the decrease.
Heads Will Roll
Marketing maneuvers aren’t the only element driving Proctor & Gamble’s efficiency efforts. P&G plans to reduce its staff by more than 5,700 in non-manufacturing areas, including marketing, by eliminating what it refers to as “redundant roles,” while at the same time accelerating hires in high-growth countries such as China.
J.C. Penney disclosed that it has set an $800 million capital budget to fund the first year of its radical retail reinvention under CEO Ron Johnson, but expects to buffer the outlay by realizing $900 million in annual savings by 2013. Personnel cuts and reduced store labor costs figure prominently in the plan, with $300 million coming from store labor and headquarters cuts. Mr. Johnson doesn’t seem to think that reduced head counts and great customer service are mutually exclusive, however. According to Johnson, technology such as RFID will enable store associates to spend more time with customers rather than monitoring shrinkage. Personally, I see fewer bodies being dedicated to promotional housekeeping as Penney’s greatly simplified pricing scheme takes shape.
In retail, cutbacks have traditionally signaled the beginning of austerity programs. Now, retailers and other marketers are finding a new world of ways to snip and shift without sacrificing their long-term brand vision.
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This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) website.
