Clerks

David Carr’s column in today’s NY Times starts by noting that “executives at Circuit City decided last Wednesday to cut costs by laying off 3,400 of their most experienced salesclerks.” But instead of providing fodder for another rant about the enormous and still-growing disparity between CEO and worker pay, Carr goes after the media, including his own paper.

After hearing a fairly expansive report on public radio’s Marketplace late Wednesday, I woke up the next morning eager to read more.

 

USA Today ran a short article on the front page, The Wall Street Journal ran a brief on B4, The New York Times published a wire report inside its business pages, while The Washington Post and The Los Angeles Times gave the news a bit more room.

 

Only the piece in The Baltimore Sun really explored the broader implications, while most of the coverage stuck to the usual suspects and themes. There were a few quick mentions on the evening news, but I saw no cable-talk umbrage at what this meant. And the next day, it was yesterday’s news.

Sure, Carr does take a nice detour into the theme of greedy incompetent CEOs.

The Circuit City pratfall does have an executive level narrative as well: if you add up salary, bonus, stock options, and other perks, Philip J. Schoonover, chief executive, and W. Alan McCollough, chairman, received almost $10 million in various kinds of compensation last year for steering the company to its imperiled state.

And he very smartly connects it up with the ever-widening chasm between the haves and the have-nots.

In a bit of happy coincidence, The New York Times did have an article on Thursday in its business section demonstrating that the top 300,000 Americans had almost as much income as the bottom 150 million Americans. The explanation was just a flip of the page away in the brief about Circuit City.

But Carr is careful to stick to his context: the media’s poor job of reporting the wider implications:

True, these aren’t the kind of union jobs with benefits and wages that made America what it is today. But increasingly, America is nation of clerks — not adolescents in their first jobs, but heads of households struggling to get by on the desiccated compensation that working in retail provides. Newsrooms, which should know something about layoffs, have trouble fathoming that many people work in retail because it is the only work they can find.

“Newspapers have shifted from going after mass audiences to targeting upscale audiences. This is a great story,” Mr. Martin said, referring to the Circuit City layoffs, “but it’s about working people. There have been dual wage systems before, but here you have something completely different — the wholesale firing of people who did their jobs well.”

Carr briefly touches on the proximate causes of the layoffs: poor sales.

Last summer, I needed some gadgets for a multimedia project, so I walked in to a Best Buy. A young man walked me around the floor, assembling a bag of components before promising me that it would all work. It did and I’ve been back to Best Buy twice since then, not because I checked prices, but because I knew they had well-priced merchandise with knowledgeable sales help.

 

Circuit City seems to have forgotten that the customer interaction — the user interface, to use contemporary language — is their point of difference in an age when consumers can have perfect pricing information with the click of a mouse. “In a service economy where all the books say you are supposed to put the customer first, Circuit City is doing exactly the opposite,” Mr. Martin said.

Surprisingly, he doesn’t connect it up with reports last month about the phenomenal sales numbers being put up by Apple’s 174 stores, something that was done very nicely last week by my favorite financial analyst, Francis McInerney at North River Ventures. Red Herring was, as far as I know, the one to break the story of how Apple was trouncing every other retailer at per-square-foot store sales, based on a December 2006 report by the analysts at Bernstein Research.

Here’s McInerney’s take:

New York — To understand what ails Circuit City, just stroll up New York’s Fifth Avenue the fifteen or so blocks from 42nd to Central Park. On the east side, you pass Best Buy, sales of $930 a square foot, then past Saks, with sales of $362 a square foot, and on to Tiffany & Co. with sales of $2,666 a square foot. Just before Central Park you come across the world’s new retail monster, Apple, with sales of $4,032 a square foot. These are average sales for Apple, which gets about 13,800 visitors a week in its stores. Apple’s Fifth Avenue store gets a whopping 50,000 visitors a week, making it, at 2.6 milllion visitors a year, one of New York’s primary tourist destinations, and driving over $8,000 a square foot in sales.

McInerney asks himself, what’s making the difference, and comes to the same conclusion as Carr: it’s the user experience.

What makes Apple such a stand out? Nothing. That is, it has practically nothing in the store except for a few computers, TVs, and iPods. And lots and lots of people. All buying. If you’ve ever shopped in a Circuit City, you know that an Apple store, no matter how crowded, is like a Hawaiian vacation.

Like Carr, though, he has his own set of interests—in his case, the different financial picture each company paints, and which is a good investment, and why. His analysis is pretty interesting, if you’re interested in that sort of thing. I for one am.

But I’m also interested in the user experience itself. Retail is a funny thing. We develop a relationship with a store, which has a brand of its own and an experience we either like or don’t like. I can remember supermarket shopping when I lived in New Jersey. I usually went to Kings, even though it was more expensive, and not particularly convenient. Part of the reason was that I could find certain brands there and not at, say, Pathmark. But part of the reason was that I was very comfortable with the way the aisles were laid out and the way the items were laid out within the aisles. It all made sense to me and I knew where to go for something, even if I’d never bought it there before.

I also remember going to Macy’s, at the nadir of its existence, in the early 1990s, and being unable to get a salesperson to do so much as check me out with the items I had found on my own. I dropped the clothes I had in my hand and walked out, thinking to myself, “My god, they literally don’t want my money.”

As it turns out, Apple has been doing a phenomenal job at the equivalent of laying out the supermarket aisles, and another phenomenal job at stocking the stores with clerks who want to take people’s money. Fortune magazine did a great job last month looking that just that, in an article that I found via a blog post over at Jigyasa Consulting, so I’m going to quote from them.

2. Search for the best, hire the experts:

 

“No. 1, I started asking who was the best retail executive at the time. Everybody said Mickey Drexler, who was running the Gap.”

 

Drexler joined Apple’s board. Jobs then hired Ron Johnson, who was then a merchandising chief at Target.

 

3. Build Prototypes:

 

‘Prototyping’ maybe an accepted practice in Design and Innovation. As Tom Kelley, in “the Art of Innovation” says “Prototyping, brainstorming and observations. These are the fundamentals, the reading, writing and arithmetic of innovation.” Yet, how many companies do it across the organization.

 

Steve Jobs considered “Building a protype of the store” as one the best pieces of advice he received.

 

“One of the best pieces of advice Mickey ever gave us was to go rent a warehouse and build a prototype of a store, and not, you know, just design it, go build 20 of them, then discover it didn’t work,” says Jobs.

 

In other words, design it as you would a product.

 

“Ron and I had a store all designed,” says Jobs, when they were stopped by an insight: The computer was evolving from a simple productivity tool to a “hub” for video, photography, music, information, and so forth. The sale, then, was less about the machine than what you could do with it. But looking at their store, they winced. The hardware was laid out by product category – in other words, by how the company was organized internally, not by how a customer might actually want to buy things. “We were like, ‘Oh, God, we’re screwed!’” says Jobs.

 

“So we redesigned it,” he says. “And it cost us, I don’t know, six, nine months. But it was the right decision by a million miles.”

When the first store finally opened, in Tysons Corner, Va., only a quarter of it was about product. The rest was arranged around interests: along the right wall, photos, videos, kids; on the left, problems. A third area – the Genius Bar in the back – was Johnson’s brainstorm.

“When we launched retail, I got this group together, people from a variety of walks of life,” says Johnson. “As an icebreaker, we said, ‘Tell us about the best service experience you’ve ever had.’” Of the 18 people, 16 said it was in a hotel. This was unexpected. But of course: The concierge desk at a hotel isn’t selling anything; it’s there to help. “We said, ‘Well, how do we create a store that has the friendliness of a Four Seasons Hotel?’” The answer: “Let’s put a bar in our stores. But instead of dispensing alcohol, we dispense advice.”

And so, really, it comes back to the CEOs and the workers again, after all. A smart CEO creates an environment where smart workers can talk to customers with knowledge and respect. A stupid CEO doesn’t. Eventually, the market rewards the one. Unfortunately, if the market punishes the other at all, it takes its sweet time about it. What’s it’s always in a hurry to do, though, is have the incompetent CEO punish the workers.