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The Merchant Magazine (ISSN 7399723l' (USPS 796560) is published monthly at 4500 Campus Dr,, Ste. 480, l{ewport Beach, Ca. 92660-1872 by Cutler Publishing, Inc. Periodicals Postage paid at Newport Beach, Ca., and additional posl offices. lt is an independently-owned publication for the retail, wholesale and distribution levels of the lumber and building products markets in 13 westem states. Coovrioht@2013 bv Cutler Publishing, Inc. Cover and entirb bntents ar6 fully protected and must not be reproduced in any manner without wrltten permission. All Rights Reserved. lt reserves the right to accept or rejeciany editorial or advertising mattei, and assrimes nri liabilit! for materials fumishei to it.

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Flip-flops arentt just for politicians

fr was JUST announced that the c.e.o. of J.C. Penney is out. Nothing unusual perIhaps. except that it highlights how wrong decisions can cause the downfall of the best managers. It also shows that if you must flip-flop, do it and do it fast!

First, some background: I haven't been in a J.C. Penney for some time, mostly because the stores have seemed 20 years out of date compared to Macy's, Bloomingdale's, and others. In my rare visit, the merchandise mix seemed unfashionable and the stores were unappealing. They lacked any real identity.

After years of mismanagement, a new hot-shot c.e.o. was brought in from Apple and, as is usual when new managers come in, radical surgery took place. The problem was what may work in an Apple Store may not work in a JCP. And in the wantit-now environment of Wall Street and instantaneous performance, even if the new plan could work, it almost certainly is not likely to be given the time to succeed.

The problem is, when I heard of the new plan about 16 months ago, my first inclination was that it was never going to work. The tumaround strategy of moving to new and perhaps younger brands to attract younger shoppers, while making some sense (indeed, some results suggested it was slowly working), was too slated towards shoppers who do not go to JCP and instead alienated current shoppers, leading to massive losses and a large drop in revenue. Wholesale shifts are always risky and, in this case, wrong. But that was only part of the change. The largest shift in strategy was to get rid of sales events and move to everyday low prices. A horrible decision!

If you train your customers to expect end-of-week sales each and every week and they continue to see advertising from every other competitor while you cut your ad budget substantially, then over time you get what you deserve. If you read that at Macy's that shirt you need has been discounted from $49.95 to $24.95 (and additional discounts will bring it down to $16.95), then you are not going to check out what JCP has, even though JCP may price the shirt every day ar $19.95. We are trained to go to the store advertising the big sale price. Out of sight, out of mind! We all want a "sale" and to announce them, we all need to advertise them.

Experience is making mistakes and learning from them. If you manage the numbers, it soon becomes clear what is working and what is not. I do not care who it is (including myself), we have all made wrong business decisions (which is why there are so many corporate management changes). The real failure is not to admit a wrong decision and make a change. If you need to flip-flop, do it! Don't make a mistake that everyone knows is a mistake and stick with it because of pride or to avoid looking weak. In fact, I would argue that it makes you weak to not adjust as target numbers and dates come and go and results are not happening.

The worst mistake you can make is to alienate your regular customers. Yet we often don't look two or three steps ahead to see how our decisions affect others. Fortunately, the public can be somewhat forgiving. Coca-Cola's turnaround following its disastrous formula change about 25 years ago provides a great lesson about flip-flops for business schools today. Possibly the biggest marketing fiasco of all time (tuming a beloved product into one current customers hated) was defused after long and loud mea culpas from executive management, aggressive advertising, and a PR campaign that boosted the stock price 70Vo in six months. So the moral is. when vou are wrong, admit it and make changes fast.

Lastly, as we hit the second quafier, the year has started well by all accounts, but supply has its issues and it will be interesting to see how the industry handles this challenge and the higher prices that will result.

Alan Oakes, Publisher aioakes@aol.com www. bu ild n g-produ cts. com

A publication of Cutler Publishing 4500 Campus Dr., Ste.480, Newport Beach, CA 92660

PublisherAlan 0akes ajoakes@aol.com

Publisher Emeritus David Cutler

Director of Editorial & Production

David Koenig dkoenig@building-products.com

Editor Karen Debats kdebats@building-products.com

Contributing Editors

Dwight Curran

James 0lsen

Carla Waldemar

Advertising Sales Manager

Chuck Casey ccasey@building-products. com

Administration Director/Secretary Marie Oakes mfpoakes@aol.com

Circulation Manager Heather Kelly hkelly@building-products.com

HowtoAdvertise

Cfiuck Casey

Phone (949) 852-1990 Fax 949-852-0231 ccasey@building-products.com

Alan Oakes www. building-products. com

Phone (949) 852-1990 Fax 949-852-0231 ajoakes@aol.com

CLASSIFIED David Koenig

Phone (949) 852-1990 Fax 949-852-0231 dkoenig@building-products.com

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