Today’s Wall Street Journal offered a timely perspective article focused on the current state of senior leadership in the retail industry. The article, Big Retailers Find it Hard Shopping for a CEO, (paid subscription required) points to three major retailers, JC Penny, American EagleOutfitters and now Target, as each conducting CEO searches. In the case of JC Penny, a search for a permanent CEO has been underway since last summer. The WSJ articles quotes current retail executives, industry observers and consultants as indicating retailers have to be transformational with abilities to execute faster to consumer and market desires, and such leaders are getting hard to find within the industry.
While each of these retail chains has what are believed to be unique needs, the article reinforces some inescapable industry trends. This author has already pointed out to readers is that there is significant structural change underway in retail, pointing to potentially permanent declines in shopper traffic among brick and mortar retail stores. Consumers now favor an online shopping model. The most significant validation of that trend came from this week’s announcement from Wal-Mart indicating that the retailer’s online Internet sales grew by 30 percent, to a level of $10 billion, in the fiscal year ending January 31. That surpassed Amazon’s growth rate of 20 percent. But, according to the Wall Street Journal, Amazon sold more than its next 10 biggest competitors combined, including Apple, Wal-Mart and Staples.
Responses to these structural shifts are already underway and will continue. Office supply retailer Staples announced that it was permanently cutting back on its brick and mortar store presence. This week, rival Office Depot announced plans to close at least 400 stores. Reports indicate that Sears Holdings is expected to announce more store closures if not other measures.
In this era of online retailing and Omni-commerce, there are two leadership competencies that will differentiate tomorrow’s executive leaders in retail. They are a deep understanding of social-media fueled marketing and Internet focused retailing, and a deep awareness, understanding and appreciation of end-to-end supply chain inventory deployment and fulfillment capabilities. From our lens, recruiting for retail C-level executives has been too focused on classic merchandising, finance or traditional brand marketing.
Then there is the other extreme.
Today, the San Jose Mercury Newsreported that the newly appointed head of all of Apple’s online and physical retail operations, Angela Ahrendts, was awarded an eye-popping $68 million restricted stock signing bonus, not including an undisclosed salary. The report indicates that the stock package alone is 10 times more than the average CEO compensation package among 177 publicly traded Silicon Valley companies. The former CEO of Burberry was recruited because of her retail design and merchandising experience. Already, the tide and buzz of expectations is rising, similar to when the former head of Apple’s retail operations was recruited by JC Penny. We now know how that turned out.
By our view, board members and executive recruiters seeking the new leaders for online and other retail should reflect on what is occurring in other industries. CEO’s of Apple, General Motors, McCormick Foods, Wal-Mart, Zara and other firms demonstrated operations, supply chain and business networks understanding and savviness. While they may not make that ideal first impression on the Wall Street financial community, they sure as heck understand what it takes to lead a more responsive and service focused organizations and supply chains.
I will close this commentary with one other final note. If retail and online firms are looking to recruit tomorrow’s up and coming talent, perhaps they should include recruiting trips to colleges and universities with concentrated supply chain management programs and curriculum.