Loehmann's: A Reluctance to Change Spells the Bitter End

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Customer Relationship Management
Customer Service
Last week, my friend and I made one last trek to Loehmann's after finding out the discount department store will close its doors later this month after 93 years in business. We wanted one last chance to wade through the racks of latest fashions and to take advantage of the 60 percent discounts.

Last week, my friend and I made one last trek to Loehmann's after finding out the discount department store will close its doors later this month after 93 years in business. We wanted one last chance to wade through the racks of latest fashions and to take advantage of the 60 percent discounts.

The chain, which started its roots in a basement in Brooklyn, N.Y., grew to 100 stores in 17 states at its peak and became the go-to staple of frugal fashionistas from ages 20 to 80. For many, Loehmann's represents a piece of nostalgia. It's grown to symbolize your prom dress, first date outfit, and the first suit you wore to your first job interview.

I spent much of the latter portion of the 90s and the early part of the past decade popping into Loehmann's when I felt up to the challenge of the hunt or when I was search of an outfit for a special event. In recent years, however, I noticed my visits to the store had dropped off considerably. In fact before last week, I can't remember the last time I shopped there.

What had changed? Nothing, and therein lies the problem.

Loehmann's business model, where it buys unsold clothes from designer brands, then sells them a season later at discounted prices, worked for much of the 20th century. But in recent years the company suffered from the emergence of designer clothing flash sale sites like Gilt, Rue La La, and Hautelook, which deliver "exclusive" deals directly to customers' inboxes and mobile devices and specalize in hyper-personalized service.

I suspect that the company's customer base also deteriorated from poor service. During last week's visit, as my friend and I approached the dressing room with our arms full of clothing as the store was closing in 20 minutes, the surly clerk, snapped, "Get on with it." Ah, yes, that was the Loehmann's most customers have grown accustomed to experiencing, and that also hadn't changed.

During the 80s and part of the 90s, the store was able to maintain its loyal customer base given the attitude of its seemingly untrained employees. But over the past decade, innovative retail companies have adopted CRM, customer centricity models, and employee engagement practices. As such, customers are now accustomed to receiving helpful, friendly, and personalized service from knowledgeable employees when they shop and therefore won't tolerate receiving anything less.

Numerous negative employee reviews of the company on Glassdoor.com point to poor management and a culture of complicity--potential reasons for the underlying problem. Some reviews include:

- Inconsistencies in corporate decisions and direction.
- Unprofessional management and staff
- Terrible culture and HR
- Executives who don't acknowledge associates and don't respect subordinates

Bad management, a toxic culture, and inability to adapt are prime reasons companies fail. While there is no litmus test for adaptability problems, there are certainly signs that an enterprise is having trouble responding to the changing environment around it. Does the company have trouble hiring motivated employees? Is its market share in decline? Do the products lag the competition? Is it incompetent in delivering exceptional service? Is its customer satisfaction and NPS dropping?

Effectively adapting to rapid change must be a relentless activity for companies. Loehmann's relied on old business models and the mindset that says, "We've always done it this way, so why not continue the same way?" A willingness to embrace change and the ability to recognize the possibilities such changes could create may haved saved this old discount dinosaur from retail extinction.

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EXPERT OPINION