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January/February 2008

A Retail Publication by

In anticipation of slow economic growth, retailers are acting to

protect the bottom line. By reducing capital investment, analyzing
inventory, optimizing staff, or slowing expansion plans, companies
are moderating their long-term goals in favor of short-term
initiatives. As one struggling retailer put it, “We need to put things
out there quickly, to test and refine. We don’t have time to wait for
what is perfect.”

Where do you find quick wins and new brand connections? In a

recent interview with The Wall Street Journal CEO Mike Ullman
shared J.C. Penney’s approach for finding opportunity in a Finding
Quick Wins
slowing economy: Go after a bigger piece of the existing
customer’s wallet while attracting under-penetrated segments.
Not with price cuts, but by adding more variety, newness and
concepts crafted to excite the shopper. For example, in-store
Sephora boutiques were one of the store’s top performers during
the holidays. There will be no dialing back on their plans for the
exclusive American Living clothing line from Polo Ralph Lauren.
The commitment is long-term, and will give the customer a lot to be Applebee’s began work to make their brand more relevant. Quick wins
excited about. included a new menu and a retrofit design with key brand drivers to make
customers feel good again. Simultaneously, Applebee’s asked Design
“When speed is crucial, audit your store experience,” says Scott Forum to create and test three virtual prototypes to see which would have
Smith, Design Forum senior vice president, design and planning. the best chance for increasing frequency. Analysts have said that
“That’s where you’ll find plenty of opportunity for quick wins. Your Applebee’s needed to remodel its dated restaurants, a major investment for
first inclination might be to cut prices, but only Wal-Mart is in a the 1900-store chain. With solid plans for the future and stores currently
position to do that. executing against the new vision, the inventors of casual dining were
acquired by IHOP with high expectations.
“Improving the shopper’s perception of the brand is a potent strategy
for winning back consumers. And it can be done with relative speed “Sustained success is possible when retailers elevate the store experience
if you focus on relevancy. Things may have creeped onto the sales while simultaneously pushing the envelope on their brand,” says Smith.
floor that have nothing to do with your master brand. Or the “This ‘parallel tracks’ approach helps ensure that your concentration on the
merchandise just doesn’t speak to the needs of your target segment. short term will not lead to mediocrity in the store. The brand evolves
You do need to take the time to get accurate and actionable customer holistically.”
insights so you can fix the right things—those that make the biggest
impression on your shoppers.” Retailers with really large networks are especially concerned about how to
show improvement in existing stores. When there are so many stores and
According to Smith, the additional good news is that, like Penney’s, so little time, a strategy framework becomes essential.
businesses can pour resources into making stores more productive in
the short term without having to completely reverse long-term plans Mid-tier hospitality leader Holiday Inn spent five years getting its house in
for a more powerful brand vision, advanced store prototypes, or order in preparation for launching a radical new image in the form of a
finding where to compete in the future. With careful management, ground-up prototype slated for 2009. In partnership with Design Forum,
present and future plans can run on parallel tracks. Holiday Inn spent most of 2007 working on a new vision for its identity
and experience. It led to an innovative and aggressive quick-win retrofit
“We’ve seen companies succeed at this when they take the time to program based on building customer relationships at the brand touchpoints
establish a strategy framework for learning what their ‘store of the that matter most to their guests. Holiday Inn also initiated a new service
future’ should look like and which experience innovations will result culture to ensure hotel staffs develop the behaviors and skills that fit with
in the fruitful quick wins they need today,” says Smith. “One doesn’t the brand ideal. Their transformation made business news headlines when
have to stop for the other.” it was unveiled to a standing ovation from over 4,000 owners and
operators last fall. It all began with a strategy framework for learning what
A couple years before International House of Pancakes bought
their future should look like and determining which experience moments
Applebee’s, America’s neighborhood grill and bar was getting a
to invest in for the short term. The franchise looks to be reviving the
little tired. The company had taken many operational actions to do
essence that was lying dormant in its brand for so long.
things better and faster. Diners still appreciated its convenience and
casualness, but were unenthused by the food and the service “An economic slowdown is like one big long moment of truth. It’s the
experience. The casual dining leader had become generic—a ultimate test of who you are as a brand,” says Smith. “The key is not to
category, not a brand. Sales were slowing and franchisees wanted abandon your long-term goals. You can strategically map out the future
action, while Applebee’s delayed a new prototype in favor of with quick wins to use right now. From what we’ve seen, companies that
meeting short-term earnings goals. But “better and faster” didn’t power ahead in times like these turn out to be the most successful when
produce results. The numbers didn’t budge. The company realized it growth returns to normal.”
needed to innovate by doing things differently.
Chairman’s Commentary

Building Confidence
I’m not convinced we’re headed into a full- Whole Foods versus the Baconator. Last year we saw the natural and
blown recession, but all the signs point to a organic food trend culminate in Whole Foods’ acquisition of its rival
challenging period ahead. So, many of our Wild Oats. And famous restaurant guide Zagat’s rated Wendy’s
recent client discussions have centered on how best-tasting fast food burger. The extremes are relatively easy to cater
to make the best of business in such a climate. to. However, the average shopper will need to feel good about the
healthy choices they are making for their family as well as their
Stay fresh. “Innovate” is the retail rule that indulgences. Mom is still the family’s center, but dads are there too,
doubles in importance during an economic spending more time with the kids. They need recognition in the
slowdown, so consider escalating your efforts in marketplace. The older crowd has become less predictable.
the search for new ways to present your Paradoxically, “retired” doesn’t mean you’re not working. Teens are
offerings, as well as freshening the mix. Stores the one group not planning to slow their spending anytime soon. It’s
are enormously vulnerable to becoming stale just harder to reach them since they’re multi-tasking, using more than
and left behind if that innovation engine isn’t one medium at a time.
constantly chugging away. And it can’t be just new, your ideas must
also be relevant to people’s deeper concerns—value will certainly be For all segments, personal, social and family life is organized via
a major one, but overall store experience can make or break the technology. It’s responsible for the explosion in choice and individual
shopper’s choice, especially if she feels the need to choose between expression that’s making us so contradictory. Those contradictions
a shorter list of retailers this year. make it more challenging to guess the logic behind shopper choices.
Intuition is still good, but shopper research is
Keep track of how customers are spending
their money, time and energy. Last year the
People have money better. As trend experts tell us, everyone seems
to believe they belong to a market segment made
green movement exploded and most of us are
in passionate pursuit of the latest developments
but lack confidence. up of exactly one person.

in sustainability. West Elm and Elephant Pharm just entered the Against this backdrop of an increasingly splintered society and
LEED Retail Pilot Program (Leadership in Energy and forecasts for smaller gains in retail sales, we are advising retailers to
Environmental Design) to help develop guidelines for all future optimize current assets. Now’s not the time to be conservative in the
retail projects. I’ll have you know, the first LEED-certified retail store. Find areas of your store that could work harder. Since more
project in the U.S. was right here in Ohio, an 80,000-square-foot products don’t always lead to more sales, rationalize assortments. And
Giant Eagle supermarket that gets 50 percent of its electrical energy always see things from the shopper’s perspective. What you think is
from wind generation. J.C. Penney and The Home Depot are important may mean little or nothing to your customers, so make sure
beginning to identify products by their earth-friendly attributes. So, they give you credit for
judging from the buzz, your shoppers clearly want you to help them in-store investments.
feel they are doing something positive about fair trade, energy and
the environment. The upshot is, there’s still plenty of blue sky out there. The retail
business will grow in 2008, just not as much as in previous years.
Small cars and big TVs. A quick look at other trends from 2007 will People have money, but lack confidence since their home values in
make you think we are living in a parallel universe. Or maybe many many cases have decreased. Do anything you can to be emotionally
parallel universes. For example, even though some of the most compelling, help justify purchases and deepen the brand relationship.
exciting new models at the Detroit auto show were the bad-boy As always, companies that invest in innovation now will come out of
performance cars like Dodge Challenger, with oil at $100 a barrel, this slowdown faster and in better shape than those that don’t.
the likes of Smart and Prius will find a welcome market. Sales of the
trucks and SUVs that have been serving as our mobile living rooms Thoughtfully,
may slow down a bit more. Our actual living rooms could become
the personal retreat of choice, thanks to pain at the pump and the
countless sleek stylish television sets, computers, high-definition
everything and downloadable programs now available. D. Lee Carpenter
Chairman & CEO

7575 Paragon Road, Dayton, Ohio 45459 D. Lee Carpenter, Chairman & CEO Reprints of articles or excerpts without
Phone: 937.439.4400 Fax: 937.439.4340 Jill Davis, Editor the express written permission
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and complete the contact form. © January/February 2008
The idea that growth can be good is the human ecological footprint, we offer a
argument made by William McDonough different vision. What if humans design Executives intent on becoming
and Michael Braungart in Cradle to Cradle. products and systems that celebrate an literate in the principles of sustain-
(North Point Press, 193 pages, 2002). Take abundance of human creativity, culture, and ability undoubtedly consider this title
a look at nature, the pair says, and you’ll see productivity? That are so intelligent and safe a must read. Published in 2002, the
that growth is not only good, but necessary that our species leaves an ecological footprint Cradle to Cradle philosophy has
—that nature’s very abundance is what to delight in, not lament?” become part of the international
environmentalists (and the rest of us) business vernacular. For products,
[Much of the] book is devoted to explaining
depend on and celebrate. The key is the C2C certification is now an impor-
how to translate that theory into practice.
right kind of growth—and the key to that is tant sustainability benchmark. Top
[The author’s] strategy is eminently
better design. universities have made the book part
graspable, for it is based on the straight-

of their curricula. It has inspired
forward principles that waste is food, that
young industrial designers, archi-
by Hal Clifford there is no “away,” that everything is part

By Design
tects, engineers and chemists who are
of a cycle.
now ready to act on change. Because
According to Cradle to Cradle, waste (which it offers a technical solution that
is what most pollution is) is a product of bad doesn’t mean less economic activity
design. Regulations are enacted to control and more regulation, progressive
McDonough, an architect, is the founder of
waste, but the message of regulation is, “Be corporations are willing to look at it
McDonough + Partners and has received a
less bad.” Good design says, “Be good.” as the framework for moving
slew of awards for his environmental
Traditionally, designers of economic towards a sustaining future.
designs. Perhaps most impressive, he was
processes tried to increase profits and reduce
hired by the Ford Motor Company to turn
costs. The easiest way to do that was to
the firm’s original manufacturing plant into
“externalize” waste as pollution. But as
a green automobile factory, a $2 billion
“away” gets closer to home, that becomes
undertaking. Braungart, a German chemistry
less acceptable. Change the game, say
Ph.D., cut his teeth leading Greenpeace’s
McDonough and Braungart, by changing the
chemical division, then went off to found
objectives; don’t seek only to profit
the German Environmental Protection
financially. Ask yourself, “How can we love
Encouragement Agency, which helps
all the children, of all species, for all time?”
companies design products with an eye to
their entire life cycle. That’s a little woo-woo, perhaps (and
happily, there’s very little of that in this
Reading McDonough’s and Braungart’s
book), but it sums up the paradigm shift
manifesto will be alternately remarkably
proposed by Cradle to Cradle. Impressively,
encouraging and deeply depressing. Take
that shift is being implemented in material
the authors’ analysis of recycling. Recycling
ways in decidedly non-woo-woo companies
is good, right? In fact, they say, it is often
such as Herman Miller, Steelcase, Ford,
very, very bad. For example, recycling
and Nike.
plastic bottles into that groovy fleece jacket starting to grasp this, and Cradle to Cradle is
means bringing toxic antimony into contact McDonough and Braungart are careful not to one blueprint for how they, and the rest of us,
with your skin. Oops. Or how about being be too glib about technical cure-alls, noting can profit from that consciousness.
more efficient? We know that’s always that the sort of change they propose is going
Perversely, their book may lead you to stop
good, don’t we? Um, actually, no: “Being to be incremental, spurred on by individual
recycling your SoBe bottles and start buying
less bad is not being good,” says commitments to environmentally sound
virgin printer paper—but it might also drop
McDonough. “If you want to go to Mexico, living. Consumers increasingly recognize that
sustainability issues right onto the CEO’s desk,
and you’re driving toward Canada, even the dollars they spend support a whole
which is precisely where they need to be.
if you slow down you’re still going system, and that they can choose between
to Canada.” organic food and factory farms, coal burning
Hal Clifford, journalist, author and speaker has
plants and wind generation, fair trade and
But just when you’re beginning to despair written for the New York Times Magazine, The
exploited Third World workers. Today, we
about environmental solutions, you Wall Street Journal, the Boston Globe; appeared on
can learn a lot about the companies behind
encounter an idea [like] this: “We see a CBS Evening News, Larry King Live, CNN, and
the items we purchase, and once we know,
world of abundance, not limits. In the midst NBC Nightly News. He is executive editor of Orion
it’s hard not to make conscious—and
of a great deal of talk about reducing the Magazine.
conscientious—choices. Companies are