The latest developments in the love triangle (or perhaps more accurately, profit triangle) among Martha Stewart’s self-named brand and its two main retail partners, Macy’s and JCPenney, offers a stellar example of just how quickly things can change in retail. All three brands have great name recognition and relatively long histories. And yet, the events of just the past few years and months have led to substantial changes in the way they interact, partner up, and sell products.
For Martha Stewart Living, the most notable change came about when its founder and figurehead was convicted of insider trading. Considering that Stewart largely was the brand that bore her name, her widely publicized punishment created significant challenges. Shoppers once yearned to add Stewart’s classic style to their homes, by buying her line of décor, white goods, and kitchen ware. After the conviction, they began to wonder if Stewart was quite as aspirational as she seemed. In turn, brand sales fell precipitously, down from $328 million at the brand’s peak, to an estimated $171 million in 2013.
In the meantime, the brand had signed contracts to place its merchandise in two national retail chains: Macy’s and JCPenney. In early 2012, the two retailers entered into a lawsuit, battling over which one got to keep the rights to the Martha Stewart line. The battle was understandable, assuming Martha Stewart Living was selling. Macy’s wanted to avoid a down-market reputation, so that it could sell the brand’s pot, pans, sheets, and towels at a premium. JCPenney wanted a licensing partner with a reputation for quality, to ensure that customers visited it for quality, not just price.
But JCPenney also has been the subject of controversy and upheaval. Within the past several years, a powerful stockholder in the company initiated the firing of JCPenney’s CEO Mike Ullman. The new CEO Ron Johnson, who came over from Apple, instituted a new and widely reported strategy, in which JCPenney would no longer offer sales, promotions, or coupons. Instead, it would promise consistent low prices. The new strategy was a grand failure—customers hated the idea of losing the advantage they felt the promotions gave them—leading to Johnson’s firing. The stockholder who started the whole affair sold his shares, and Mike Ullman was reinstalled as CEO.
Thus, it’s been an exhausting few years for JCPenney. Ullman had had enough. So he announced recently that JCPenney was dropping out of the fight for Martha Stewart Living, despite the investments it had already made. In the announcement, Ullman indicated that the brand had become too expensive for JCPenney’s target market of price-conscious shoppers anyway, such that its sales were accordingly weak.
Macy’s seems to be the only player in this retail drama that has not undergone massive, turbulent changes in its leadership, positioning, and licensing agreements. But with so much going on with its partner and competitor, it also must be tough for Macy’s to run its planning sessions these days.
Source: Rick Newman, “The Comedown Continues for Martha Stewart,” The Exchange, September 6, 2013