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Tag Archives: Retail Industry

Cutting staff is not a good operations strategy for retail

Retailers often resort to making HR changes in order to lower costs. They simply cut staff, which is only a temporary fix. As Zeynep Ton, Adjunct Associate Professor of Operations Management at MIT’s Sloan School of Management, commented to ABC’s “Good Morning America,” “retailers who cut staff to cut costs are succumbing to a vicious cycle, where the staff reductions result in lower customer satisfaction,” which then negates the financial gains from the initial staff cuts.

The issue of retail staff reductions and its impact on consumers has come to the forefront of consumers’ minds due to recent issues at Walmart. The New York Times detailed the issue in “Walmart Strains to Keep Aisles Stocked Fresh,” April 3, 2013, and states that some employees and industry analysts feel that Walmart “no longer has enough workers to stock its shelves properly.”

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Revenue management lessons learned from J.C. Penney

The science behind revenue management is vital to many industries, not just retail. How to set the price of a product or service and extract as much profit as possible applies to many industries, including hospitality, airline, transportation, oil and gas, and advertising. It’s the pricing strategy of the retail industry, however, that has made news recently.

In November 2011, J.C. Penney brought in a new CEO—former Apple executive Ron Johnson—to make changes to the brand and its operations. Laura Heller, a contributor to Forbes even called her story on the changes, “Why J.C. Penney Will Be the Most Interesting Retailer of 2012.

Under Johnson’s leadership, the retailer implemented a simplified, three-tiered pricing strategy that slashed the prices of popular merchandise by at least 40 percent, offered “Month-Long Value” discounts on select items, and promoted clearance deals during the first and the third Friday of every month (when many shoppers get paid).

The idea was “to keep prices low on the basics shoppers look for frequently and introduce new merchandise on a routine schedule.” Forbes referred to this strategy as “a shocking move for any retailer, let alone a department store where hi-low pricing and promotions have long been the norm.”

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