By Ezequiel Minaya and Lynn Cook
The rise of online shopping, and the dominance of Amazon.com
Inc., has upended the retail sector, leaving behind plenty of
old-line, big-name stores. But several traditional brands are
managing the transition well, according to a new ranking compiled
by the Drucker Institute of the most effectively run U.S.
companies.
Among the highlights for retailers in this year's Management Top
250 rankings -- which evaluate companies on customer satisfaction,
employee engagement and development, innovation, social
responsibility and financial strength -- Home Depot Inc. remains a
standout in financial strength. The big-box heavyweight, which has
strong same-store sales and a stock price that has more than
doubled over five years, ranks in the top 1% for financial strength
among the more than 750 companies evaluated by Drucker. Now the
company is pouring $1.2 billion into speeding up online deliveries
to homes and job sites to keep up with its rapidly accelerating
digital sales.
In the innovation category, many retailers slumped this year,
but Gap Inc. improved its score, thanks to changes like rolling out
new technology that helps staff refresh inventory, which will help
its brands like Banana Republic and Athleta capitalize on the
demand for fashion that keeps up with rapidly changing trends. Gap
jumped 39 places in the overall ranking to No. 101.
In customer satisfaction, Tiffany & Co.'s efforts to
continue evolving boosted its score this year, earning the company
five stars in the category, up from four last year. The
traditionally high-end jeweler is experiencing a renaissance as it
expands to a wider range of price points and launches new, modern
collections and marketing that appeals to younger shoppers. While
sales are up, profits are under pressure as Tiffany, like other
retailers, invests heavily to improve e-commerce operations and
physical stores. The company is revamping its flagship Fifth Avenue
store in New York.
Retailers in general have benefited this year as a strong U.S.
economy and a corporate tax cut that translated into bonuses for
some American workers helped spur consumer spending.
Many retailers have seen an uptick in quarterly sales after
years of bleak news, including record store closures and bankruptcy
filings as consumers increasingly shopped online.
"Retailers are doing much better this year," says Matthew
McClintock, a senior retail analyst for Barclays. "If we were
having this conversation a year ago, people were still aggressively
thinking Amazon was going to destroy retail."
But while some investors and industry watchers credit the
retailing comeback solely to the strong economy, Mr. McClintock
says it's more than that. He believes there are companies
successfully adapting to this new digital world. "There's something
more sustainable here," he says.
Battling Amazon
The annual Drucker Institute rankings provide further evidence
that Amazon is the retailing giant to beat. It is the No. 2 company
overall, trailing only Apple Inc. But the rankings also show that
several other retailers are counterpunching with innovative
strategies.
Walmart Inc., the world's biggest retailer by revenue, and
Target Corp., which posted its best quarterly results in more than
a decade earlier this year, have stoked store traffic with a "click
and collect" service where an order submitted online will be walked
out to a customer's car. "It's way more convenient than anything
Amazon has today" for customers in need of same-day service, says
Mr. McClintock.
Best Buy Co. has made its business model somewhat Amazon-proof
by offering in-store services and expertise, several analysts say.
The company beat Target, Lowe's Cos. and Amazon in the
customer-service category in this year's Drucker list.
On the employee side, Best Buy has drastically reduced its staff
turnover rate, offering tuition assistance, backup child care and
paid time off for part-time employees to keep its talent from
straying to the competition.
Best Buy also boosted its workforce of in-home consultants by
75% to more than 500 people in 300 locations in recent months.
These consultants make house calls to help families set up
appliances and electronics.
Still, Best Buy's rise to No. 62 overall from No. 89 last year
came in large part because of its high score on social
responsibility. Paul Herman, chief executive of HIP Investor, a
sustainability ratings and investment firm, says Best Buy doesn't
send used electronics like LED TVs and smartphones to landfills, or
overseas where they are picked apart for their metals. Instead the
company captures those products at the store level and recycles
them. Best Buy has also reduced its greenhouse-gas emissions, with
a goal to slash its carbon footprint by more than half by 2020, Mr.
Herman says.
The lure of a store
Off-price clothing retailer TJX Cos., parent of the T.J. Maxx
and Marshalls chains, has bet that plenty of people still love to
shop in person. CEO Ernie Herrman recently told investors that
young customers and diverse populations love a good bargain, but
they're even more into the "treasure-hunt shopping experience" they
get every time they walk into a store and there's different
merchandise sourced from around the world.
TJX jumped to No. 72 overall in this year's Management Top 250
from No. 134 last year, and ranks 33rd out of 752 for financial
strength.
"Capitalism is Darwinian, and those that are weak players, who
have undifferentiated products and mediocre service and are
underinvested in technology, are being left behind," says Kelli
Hollinger, director of the Center for Retailing Studies at Texas
A&M University. "Successful companies offer an exceptional
customer experience because experience is becoming more important
than even product or price."
Mr. Minaya is a Wall Street Journal reporter in New York. Email
him at ezequiel.minaya@wsj.com. Ms. Cook is the Journal's
management bureau chief. She can be reached at
lynn.cook@wsj.com.
(END) Dow Jones Newswires
November 30, 2018 11:21 ET (16:21 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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