By Jim Lewis, CEO Enhanced Retail Solutions LLC
I was an assistant buyer at JCPenney when they made the move from de-centralized to centralized buying. The buying team knew it would make things so much easier and provide a consistent assortment across the chain. It would also give us the ability to better predict how much to buy. There were many other good reasons for making the change. However, the stores voiced concern that it was completely the wrong direction to take the company. The corporate side felt the field was just feeling sour over losing control, but that was not altogether true.
Years earlier, working in a South Florida store as a Merchandise Manager, a key facet of the role was selecting merchandise for your store. You also bought the appropriate quantity. The corporate buyers provided a template- with items that you had to buy because they would be nationally advertised, but then there was a broad list of items from which you could tailor the assortment. From the store’s point of view, it was great because you lived amongst your customers- and knew exactly what they wanted. On a limited basis, you could even buy from local vendors, outside of the corporate purview.
It was a very delicate dance. On the one hand South Florida’s need for more shorts, short sleeves, lighter fabrications, and a softer color palette was completely different than say Cleveland, Ohio. Even within Florida there are variations- a large Hispanic population in the south and more diversity in the North with slightly cooler weather. How could centralized buying meet the needs of all the variety across the country?
Corporate executives could offer a multitude of examples- the Gap, Federated & May Department Stores (I’m showing my age), mass merchants, etc. A long list of retailers that provided a central model and who could move more nimbly than JCPenney because of it.
A now retired colleague from JCPenney recently commented to me that JCPenney’s 2020 bankruptcy was ultimately due to the shift to centralized buying. I completely disagreed. That decision was made 25 years ago. I think it would have failed sooner if that was the case. The point is that after 25 years that person is still emotional about the decision.
Bed Bath & Beyond’s Inflection Point
Bed Bath & Beyond currently faces a similar inflection point. Store managers traditionally placed orders in a similar fashion to how JCPenney use to do it. Now they’ve moved to a centralized model. But it is not the only change taking place at Bed Bath. There are a multitude of changes going on- new systems, re-merchandising of stores, major shifts in the assortment and more. No doubt Bed Bath needed to make changes, but massive amounts of change can also bring a company to its knees. Just ask Ron Johnson.
There are far more retailers operating under the centralized buying model. There are also a few hybrid models. Many retailers use regional buying teams to tailor assortments. In many ways smaller chains that predominantly operate stores in close geographic vicinity to each other only need one assortment.
The Online Difference
Retailers have also been able to supplement their assortments online for a while now. That means anyone from anywhere can buy a product. And there is much less risk for the retailer because you don’t have to invest the capital in inventory and hope it is allocated correctly amongst the stores.
Ultimately, stores that feel they need specific assortments are relying on “buy online, pickup in store” to generate foot traffic. Once there, a store must be able to entertain, intrigue and inspire the consumer to stay and buy. That is true regardless of the ratio of short to long sleeves.
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