The Great Retail Test Store Scam

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So, Macy\’s is rolling out a test of thredUP second-hand clothing departments in about 40 of its stores. JCPenney is also testing with thredUp. Kohl\’s always seems to have some sort of tests going with assorted companies like Amazon, Planet Fitness and Aldi. Bed Bath & Beyond is famous – infamous? -for endless testing of store concepts, department rollouts and various merchandising projects. And all of them are to be taken with a very large dose of retailing skepticism.

The truth of the matter is that when a retailer proudly announces it is testing a new concept it is hoping for glorious headlines, bumps in its stock price and, more often not, a diversion from the fact that it\’s just reported another rotten quarter. Don\’t get this wrong: these tests are legitimate attempts to try new things and retailers are to be applauded for pushing their self-imposed envelopes and thinking outside the aisles. If they don\’t, they will die — sometimes slow and painfully and other times fast and…well, just as painfully.

But one has to put all of these announcements in the context of the bigger retail picture. When you do so, the storyline turns out to be very, very different.

Threading the Test Needle

Take the two thredUP announcements earlier this month. Aside from the curious timing and the lack of exclusivity, both the Macy\’s and Penney programs have one thing in common: they are very small tests compared to the size of their overall retailing fleets. Macy\’s is rolling out 40 thredUP departments, about half of which are in California, Florida and the Chicago market. (Curiously the roll-out does not include the Herald Square flagship.) The test represents about six percent of the 641 stores Macy\’s operates. Put another way, 601 Macy\’s stores do not have thredUP departments.

In Penney, the math is even dramatic. It will roll-out 30 thredUP departments out of a total of 864 stores it operates. That\’s about three percent of its locations. Yes, 834 Penney stores will not have thredUP departments.

However successful these tests are and however long they run, it could be years before they have any meaningful impact on either company\’s performance. Yet, store executives and the lemming-like business press treated these as the second coming of skinny jeans.

Kohl\’s Is King of The Tests

Kohl\’s has been particularly good at playing the retail test game, although to its credit it has taken at least one of them through to fruition. Two years ago, it began accepting Amazon returns at a very limited number of its stores in the Chicago area. It got a lot of attention but no doubt some of it was unintended when shoppers who hadn\’t read the small print tried to bring back Amazon returns at its stores everyplace else in the country.

But again, give Kohl\’s some kudos for taking the program national which it did earlier this year. The same thing can\’t be said for some of the other tests the retailer is running. Earlier this year, it sublet a portion of a downsized store in Wisconsin to Aldi, the deep discount food chain. It has talked about five or ten more, but it\’s not known how many have actually opened so far. It is running a similar test with the Planet Fitness gym chain that will run in about ten locations. But let\’s not forget Kohl\’s operates more than 1,100 stores so these two tests represent less than one percent of its fleet. There could be more down the road the company says…but the road could be very long and winding.

Bed Bath…But Never Beyond

Another big national chain, Bed Bath & Beyond, is struggling with a whole host of problems that have resulted in massive changes in the retailer\’s management and board. But one self-admitted weakness has been its seemingly never-ending series of testing products and retail concepts. Vendors to the chain have expressed endless frustrations with the fact that these tests rarely result in larger rollouts and largely served to boost opening order margins and distract from the company\’s declining financial performance.

One example was a test of a new concept for its Christmas Tree Shops division which was looking at a rebranding under the \”And That\” banner. The company opened a new format store outside of Atlanta that featured a revamped merchandising platform but didn\’t open a second store with this layout until more than 15 months later.

At its most recent annual shareholder\’s meeting, in response to questions, interim CEO Mary Winston admitted the problem and said it was on her checklist of things to fix. Previous management, she said, \”had a somewhat risk averse culture. We\’re going to speed up that process.\”

A Test in History

Perhaps one of the more historic retail testing stories involved Woolworths, the late and often lamented variety store that saw its place in the retail landscape usurped by giant drug chains, dollar stores and big discounters. It opened a new-format test store outside of Philadelphia that represented a radical departure from its five-and-dime heritage, taking the best from its new wave of competitors and putting it into a format that rivaled any other retailer in its channel. The store was brilliant. But there was just the one store…and 399 really bad, really old Woolworth\’s. Within a year the company had filed bankruptcy and was out of business.

Test vs Roll-Out

Of course, it\’s always important to make a distinction between a test store and a limited roll-out. Many times, big national chains will come up with concepts that only fit a selected number of its doors. These are important components of modern retailing and should be regarded as smart moves. It\’s only when a company tests a concept that rightly belongs in all of its stores yet never pulls the trigger that the test concept turns into a fraud.
Maybe some of these current tests will indeed get rolled out chain-wise. But history, sadly, suggests that most won\’t.

Warren Shoulberg was one of those people who brought an Amazon return into his local Kohl\’s last year – without reading the small print – and was a disappointed customer.



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