About two years ago, department store JC Penney promoted John Tighe to the prestigious job of chief merchant. It’s a vague title, but as MarketWatch explained at the time, the position is a crucial one: “The role, also known as chief merchandising officer, literally involves selecting all of the merchandise that a retailer sells, and is typically viewed as the second-highest position in the company after the chief executive.”
But last week, as part of a move to reorganize its top management, JC Penney announced that Tighe would leave the company. His position, chief merchant, would simply be eliminated.
The news was the latest sign that the future of the powerful position is in flux, perhaps especially at retailers that rely on clothing for the bulk of their sales. Once, a chief merchant would use instinct and past data to predict what shoppers would buy. But today, retail’s unrelenting speed and near-instantaneous data on sales and consumer tastes are raising questions about whether a chief merchant is necessary.
After big changes in the chief-merchant role at Target, Kohl’s, and Walmart in 2015, the Wall Street Journal detailed (paywall) how analytics and algorithms are shoving aside a chief merchant’s intuition. “In the past, it was ‘I like orange, so consumers will like orange,’” Andrew Dubin, the former chief merchandising officer of footwear brand Cole Haan, told the Journal.
But merchants now rely on sophisticated data to guide what they buy, prompting RetailWire to ask if data is eliminating the need for chief merchants altogether. Many commenters to that story felt that data alone has its limits and a chief merchant was still a necessity. But JC Penney apparently feels otherwise.
In a statement, JC Penney CEO Marvin R. Ellison said a group of executives, each in charge of different categories, “will be empowered to make dynamic buying decisions based on real-time customer data.” The goal is to keep the company fast and nimble. At JC Penney, clothing and accessories make up the bulk (pdf) of sales.
Today, spurred by the internet and social media, fashion moves so quickly that it’s become increasingly difficult to forecast much in advance what shoppers will buy with accuracy. Stores that forecast incorrectly can find themselves loaded down with unsold inventory that they have to discount to sell, hurting their profits—a situation JC Penney has recently struggled with.
The most successful mass-market fashion brands in the US constantly deliver small amounts of new products produced on short lead times, rather than buying for an entire season in advance. That’s the model JC Penney is trying to emulate, as it explained in its 2016 annual report.
Numerous department stores, such as Macy’s, still have chief merchants. What the role actually means, though, is changing rapidly.