Derek Thompson wrote a piece in the Atlantic in May, Death of the Salesmen: Technology’s Threat to Retail Jobs. It captures well a situation evident to anyone who has visited a mall recently.
Stores are basically divided in two today. Those with next to no salespeople, who are competing entirely on price. And those who believe customers will pay for service. It’s Walmart vs. Apple. JC Penney became a battleground for between these two approaches under its former CEO Ron Johnson, who came from Apple.
He tried to bring the high-touch approach, but JC Penney’s customers showed no interest in paying for it. The only “customer experience” they wanted was low, low prices.
Thompson sums up the situation in his final three paragraphs.
“Some stores have resisted the temptation to cut workers—and have benefited from higher sales and happier customers. Costco, Trader Joe’s, and QuikTrip not only have more (and better-paid) salespeople, but also report more sales per employee than their immediate competitors, according to research by Zeynep Ton, a professor at MIT’s Sloan School of Management. Other stores, like Uniqlo, a mid-level fashion retailer, and Wegmans, a grocery chain, have similarly demonstrated that you don’t need to embrace retail’s post-employee strategy to make a strong profit.
Increasingly, there seem to be two kinds of stores—those in a race to the price bottom, and those closely guarding the patina of a shopping experience. Perhaps that’s because, more and more, there are two distinct kinds of customers. There are the low- and middle-income families—squeezed between cheap wages and the high cost of essentials like education and health care—who hunt bargains. And then there are the urban bourgeois—those who rely on Trader Joe’s for lunches and Apple for phones—who are rich enough to value something above the very lowest price. “Walmart, focused on the bottom 50 percent with efficiency, is competing on price,” said Leonard Nakamura. “But stores like Wegmans aren’t. They’re competing on experience.”
When Ron Johnson, the architect of Apple’s lily-white showrooms, became the CEO of JCPenney in 2011, he brought with him a specific approach. “People come to the Apple store for the experience—and they’re willing to pay a premium for that,” he wrote in Harvard Business Review. A year and a half after Johnson pledged to replace coupons with culture, causing sales to plummet, he resigned. It would seem that customers besieged by stagnant wages and household debt don’t want a shopping experience, after all. They just want their coupons. Ironically, it is precisely this always-low-prices mind-set that has decimated retail as an American jobs engine. Cheap prices and cheap workers—that is our vicious cycle, and the ultimate American shopping bargain. We are getting exactly what we pay for.”