BRING ON THE MERCHANTS?

Bloomberg Businessweek recently gave a well-deserved nod to the turnaround progress at retailers Abercrombie & Fitch and Barnes & Noble. It's great to shine a light on talented leaders like Fran Horowitz, James Daunt, and Hillary Super.

The Bloomberg writer credits this to the return of Merchants as CEOs of these and other retailers, replacing the Finance head as CEO.

I think they've got the wrong conclusion.

Retailers sell products to consumers, hoping to build loyalty and a community along the way. It’s the right blend of great product, consumer experience, marketing magic, and importantly- great profits that make a brand effective over the long term.

The retail CEO sets the corporate strategy and overall mission for the organization. An effective CEO should operate as a generalist, leading a team of executive specialists.

Merchants focus on identifying the ideal consumer, getting the right desirable product in their hands, and engineering profit into the product, among other things.

There are Merchants who have a good balance of financial and creative skills, while many towards one skill or the other. The most talented ones use both gut instinct and analytics.

The same is true of Finance leaders. They focus on building the most effective capital structure, forecasting the business, ensuring proper cash flow, and managing the investment community, among other things.

There are Finance leaders who enjoy discussing the nuances of a well-structured chart of accounts and those who have an acute understanding of the operations of a retail business. The most talented ones use both gut instinct and analytics.

Leaders from either of these functions and any other retail function can grow to be CEOs. I think there's inspiration in that. You could become CEO!

MODELING SUCCESS

Are these retailers successful because they are led by Merchants? No, I think they are successful because of these 5 things-

1. The talent, skills, and ability of the CEO

2. The team of leaders that the CEO hires and leads

3. The team that those leaders hire and lead

4. Setting the right vision for the company

5. The ownership structure of the company and the desired $ outcome

#5 is very important. A private equity fund with a targeted exit date has a different goal than a publicly traded retailer.

That's my take. A leader from any function, with the right mix of talent, team, and vision might have what it takes to be an effective retail CEO.

Chad

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