After 15 years at J.Crew’s helm, retail mastermind Millard “Mickey” Drexler announced he was hanging up his hat. The legendary merchant’s departure was widely viewed as an inevitable step amid a slowdown that the seasoned chief could not reverse. Although Drexler’s June exit was highly publicized, his circumstances and that of faltering J.Crew are anything but rare.
As retail navigates the turmoil of a critical paradigm shift — characterized by erratic consumer behavior and explosive digital growth — the burden carried by its key decision makers has never been heavier.
“We’re having so many things that are converging together — macroeconomic trends, weather, disasters, as well as overall change in what’s important to people,” explained Farla Efros, president of Chicago-based HRC Retail Advisory. “A lot of [retail’s] leaders have become paralyzed and don’t know what to do because they understand that if they make the wrong decision, the impact that it can have and the ability that is required to fix the situation is quite significant.”
What’s more, for those in positions of power, a common modus operandi has been to stick with strategies that have been successful.
“The toughest thing, particularly for larger organizations, is that if you think about the traditional executive, they’re steep in amazing apparel and footwear experience — they really know the industry,” said Katherine Black, principal of retail and consumer strategy at KPMG. “The core issue is that the way the industry has operated historically can’t continue as is.”
Indeed, the list of traditional retailers that have lost their footing amid rapid change is lengthy and ever-growing. Out-of-business companies The Limited, BCBG, Wet Seal and Eastern Outfitters are all recent examples of the trend.
Meanwhile, Payless ShoeSource — which filed for bankruptcy this year — announced in August the retirement of CEO Paul Jones, who, like Drexler, is a longtime merchant whose prowess to handle the changing retail landscape came into question as his company faced hard times.
“Executives need to deliver growth, at least to the bottom line, while managing through a major sea change,” said Jeff Van Sinderen, an analyst with Los Angeles-based B. Riley & Co. LLC. “That was not true a decade ago — the skill set has morphed. The new paradigm requires more than merchant princes and princesses with vision to lead brands/retailers to success.”
Recasting the Role
In an industry where change is the only constant, if there is a single mark of effective leadership, experts widely agree that it’s agility.
“Leaders have to be nimble, and they have to love the customers [who shop] in their stores,” Efros said, emphasizing that today’s shopping trends are dictated by consumers as opposed to fashion’s head office. “You have a lot of CEOs — just like you have a lot of merchants — that go in and decide that they want to change the consumer. Unfortunately, we’re not in a time where consumers are incredibly forgiving because there are so many choices available to them. You’ve got to cherish [your customers] and build on that.”
KPMG’s Black — who also cited agility as a key trait for retail’s head office — noted that a CEO’s flexible outlook should also be backed by pragmatism.
“The days of ‘let’s plan 18 months in advance and make huge buys and spend loads of money’ need to be behind us,” Black said. “You need folks who can create a nimble system and adjust. They need to be willing to say, ‘I thought this was going to work like this, but I’m looking at the data and it didn’t, so I’m going to make a different decision now.’”
In that vein, Black said leaders should be cautious to avoid common pitfalls when interpreting new data — particularly in the hard-to- crack digital realm.
“A lot of people will say, ‘We need to be online or do more mobile’ — those things are not [necessarily] the answer,” Black said. “Those may be someone else’s answer that happens to be successful for them. The ability to frame up what’s really going on and why someone is successful, and where and why [your company] is not, is an [important skill].”
In the wake of an unprecedented number of retail restructurings and liquidations, for C-suite occupants, hindsight is 20/20. But experts said it is foresight that will be management’s golden ticket.
“It’s critical for top leadership to be incredibly gifted at the skill of anticipation; they need to study the market and be able to look to the future,” explained Rebecca Cenni, founder and CEO of Atrium Staffing, which specializes in recruiting for the fashion retail industry. “They have to be constantly aware that other brands will always come up to take market share. It’s a global world now. Before, fashion was dictated by New York and Paris, but you must think globally now. [You] must be prepared to not feel comfortable in [your] job on a day-to-day basis.”
Van Sinderen listed an array of important proficiencies for the leaders of today’s fashion industry.
“Consumer behavior is rapidly changing, and leaders need to pivot to exploit the opportunities while mitigating the risks,” he said. “Brand-building and marketing — including digital and social media — skills are key. Real estate fleet management, negotiation, expense reduction, talent management, and operational and supply chain [knowledge] are [also] critical.”
“Companies need to undergo metamorphosis in many cases,” Van Sinderen said.
As a clearer picture of fashion’s new C-suite emerges, so do the challenges of adequately staffing it.
“Less people are putting their name in the hat because they don’t want that [retail] exposure — obviously, if things don’t pan out, it could be a career-ender for them,” Efros said. “[As a result,] people are moving into these positions, but they’re not necessarily qualified.”
What’s more, organizations that are part of an industry in flux tend to require heavy lifting and extensive turnaround investments — which could result in higher SG&A costs and take a long time to show up as top-and bottom-line growth.
In the interim, impatient stakeholders and board members who are focused on immediate gains could place unrealistic pressures on an executive team, according to Black.
“Boards, investors and other stakeholders are expecting a whole lot from their executive team, but they’re also putting a lot of pressure on short-term results and maybe not encouraging enough long-term [strategy],” Black said. “That [aspect of business] isn’t changing fast enough.”
With those pressures in mind, Van Sinderen said he’s also observed reluctance, on the part of qualified candidates, to enter the fashion industry.
“Unfortunately, talent is apprehensive of [retail], and what I’m seeing is, some move away from it,” he said. “There just are not enough skilled, talented people in the industry or willing to [enter] for all of the brands and retailers that need strong vision, leadership and execution.”
In fact, the large number of new brands that have joined the quest to find qualified leadership is, in itself, daunting.
“One of the biggest challenges companies face when it comes to effectively staffing top ranks is keeping up with the sheer demand for top-level talent given the growing number of brands and startups,” Cenni said. “Related to that is finding and retaining executives with the right combination of skills — including those with deep experience as well as millennials who will want to grow with your company.”
Still, as intimidating as the road ahead may look — as is often the case in tumultuous times — stars are emerging.
“Store closures and layoffs [domestically] have been unavoidable for most; however, some took it upon themselves to act early and swiftly to reduce unproductive brick-and-mortar exposure, and those folks deserve credit for that,” Van Sinderen said, listing management at Nordstrom Inc. and The TJX Companies Inc. among the leaders who have helped their firms buck negative industry trends.
Meanwhile, others that have not gotten ahead of retail’s frantic shifts are likely operating on borrowed time.
“It’s going to be challenging to put the right people in the right place,” said Efros. “It takes a different caliber of folks to weather this storm. I’m not even convinced that this is a storm anymore — this is the new normal.”