By Suzanne Kapner
Retailers' powerful chief merchants, once lionized for their
knack for spotting consumer trends, are seeing their intuitions
being displaced by algorithms.
Companies increasingly are relying on number crunching rather
than a top merchant's instinct as they try to combat sluggish sales
and changing shopper behavior. Driving the trend are big-data tools
popularized by online retailers that take the guesswork out of
picking goods.
"In the past, it was 'I like orange, so consumers will like
orange,' " said Andrew Dubin, a longtime merchandising executive
who until June was the chief merchandising officer of footwear and
accessories retailer Cole Haan. Today, he said, "a great deal more
goes into the buying decision," including software that helps him
measure the performance of product on his shelves compared with
those at rival retailers.
Data's growing dominance is remaking roles in the industry.
After a 14-month search for a chief merchant, Kohl's Corp. gave the
job to its head of marketing. Target Corp. recently split its chief
merchandising and supply-chain roles, which had been held by the
same person. In November, Wal-Mart Stores Inc. decided not to fill
the position after its chief merchant left. Now executives in
charge of categories such as food and apparel are reporting
directly to Wal-Mart's U.S. chief.
The chief merchant is often the No. 2 executive in the chain of
command and seen as a potential successor to the CEO. The position
entails helping set a retailer's fashion sensibility, whether its
Target's cheap-chic formula or J. Crew's preppy take on classic
clothes. But along with that "right brain" creativity chief
merchants are now being asked to master "left brain" analytical
skills.
J.C. Penney Co. Chief Executive Marvin Ellison recently told
analysts that the retailer is going to focus more on the "science
of retailing" when it comes to presenting, allocating and
replenishing merchandise. "For a retailer the toughest thing to do
is get the right product, the right style, the right quantity," Mr.
Ellison said.
Not everyone is in favor of the greater role that numbers are
playing.
Gwen Manto, the former chief merchandising officer of Sports
Authority, remembers the first time she saw a GoPro wearable camera
at a trade show in 2010. She knew it would be a hit and bought all
of the manufacturer's supply on the spot. Her instinct turned out
to be right.
Ms. Manto said that had she been making a similar purchase
today, she would have first had to study reams of data to determine
how similar cameras had been selling and at what price.
"You now need so much data before you make a decision that
opportunities can pass you by," said Ms. Manto, who left Sports
Authority in 2012 and is now head of product innovation at
Aloha.com, a health and wellness company.
Consolidation among retailers has resulted in chains that have
grown so big that buying by instinct isn't an option any more. But
that scale comes at a price. "Stores all start to look the same,"
said Paula Rosenblum, an analyst with RSR Research. "Retailers
forget about the art of picking products that are interesting to
consumers."
Ms. Rosenblum said that baby boomers relied more on gut feel,
but as they start to retire
they are being replaced by a younger generation that has grown
up with data. In the past few years, so-called price optimization
software has become a common tool. Rather than having a merchant
decide when to mark down goods, "the computer solves that problem,"
she said.
Kohl's halted a protracted search for a chief merchant in June,
and gave the job to Michelle Gass, who retains her current roles
overseeing marketing, public relations, social media and
philanthropy. A former Starbucks Corp. executive, Ms. Gass had
little experience as a department store merchant when she joined
the retailer two years ago.
A Kohl's spokeswoman said Ms. Gass has learned on the job, and
had helped the retailer secure new brands such as Stride Rite
following the departure of its chief merchant in March 2014. CEO
Kevin Mansell said at the time of her appointment that he decided
to combine the roles because merchandising and marketing had become
more intertwined.
"The role is much more strategic, it's not just about picking
product," said Richard Jaffe, an analyst with Stifel. Still, Mr.
Jaffe worried that it might be too much for one person to handle.
"It's hard to have a fashion vision and be a quantitative expert,"
he said.
That hasn't stopped others from trying. Target ran into trouble
when it gave Kathryn Tesija the twin titles of chief merchandising
and supply-chain officer. The latter relies heavily on math to get
products from point A to point B.
Ms. Tesija gave up the chief merchant role in early July and
remains a company adviser until April. Meanwhile, the company is
searching for her replacement. In August it promoted John Mulligan,
its former finance chief, to the newly created role of chief
operating officer with oversight of the supply chain.
A Target spokeswoman said the change "allows our merchandising
team to build deeper expertise, have greater focus and operate with
clearer accountability." Through a Target spokeswoman, Ms. Tesija
declined to comment.
Joann S. Lublin contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
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(END) Dow Jones Newswires
September 20, 2015 07:14 ET (11:14 GMT)
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