Epic battles of history: customer vs. channel

Because virtually all retailers have historically organized themselves around their sales channels, there is major conflict.

Because customer data typically resides in silos, a mighty struggle exists to provide a holistic, customer-centric view.

Because systems are not integrated, attempts to provide a seamless customer experience are fraught with friction.

Because companies most often employ metrics and incentives that are aligned against internal dynamics, rather than the way customers shop, tensions abound.

As the channels evaporate in consumer’s minds, the battle between what your customer wants, needs and expects, and that which your various silo chieftains and defenders of the status quo try to hold onto, is intensifying.

To be sure, the shift from a channel-centric culture to a customer-centric one is incredibly difficult. The investments to integrate data, inventory, point of sale systems and supply chains can be enormous. The complexities in reworking incentive structures and performance tracking are undoubtedly time-consuming and challenging. And re-mapping processes and re-training an entire organization is hardly trivial.

But in the battle between customer and channel is there any question which side will ultimately win?

When the land grab ends

There is no question that e-commerce has transformed the way virtually everyone shops today. And to say that digital marketing and online shopping has been disruptive would be an understatement.

Much of retail’s market value created over the past decade has been driven by Amazon and other pure-play brands. Dozens of once powerful retail names have been hammered or completely felled by the advent of e-commerce. Many are now closing stores and desperately seeking to re-invent themselves to stay relevant or merely survive.

The digital darlings have a huge advantage over traditional retailers. As they seek to scale their claimed game changing model and to build a brand, profitability is not only a secondary consideration it is often eschewed entirely. For most, there is a land grab mentality, a semi-blind quest to acquire customers at almost any cost for fear that a more measured approach will allow new entrants to emerge or established competitors to respond more effectively–or, more cynically, will cause investors to wise up to the limitations of the underlying business model.

The number of times investors have been seduced into a growth at any cost scenario that stalls are beginning to mount. Many piled into flash-sale deals when the shake-out in that sector was totally foreseeable. Fab.com’s recent collapse won’t be only major e-tail meltdown. A shake-out is starting to happen as it’s becoming more and more clear that too many customers are being acquired at costs well above their potential life-time value. And while many are lauding the move of Warby Parker, Bonobos and others into physical stores, this evolution is borne less of brilliant insight and more of the realization that their land grab marketing efforts were rapidly losing altitude and new customer acquisition strategies were needed to maintain expected growth.

This is not to say that some of the highly valued and increasingly respected e-commerce brands don’t deserve our accolades and won’t turn out to be fantastic investments. But three things need to kept in mind as we move forward:

  1. Virtually no e-commerce only retail brands of any size have consistently made any money, including Amazon
  2. Most digital retailers will need a physical store presence to optimize their brand potential
  3. It’s comparatively easy to cost effectively acquire and retain early adopters in a digital-only model. It’s the marginal cost vs. the lifetime value of the next tranche of customers that provides real insight into the ultimate validity of the concept.

Adopting a land grab mentality is not inherently bad. In some situations it clearly is warranted. The problem comes when we don’t have a clear view of how far to push it and what we’re left with when it ends.



The unexpected virtue of ignorance

“In the beginner’s mind there are many possibilities, but in the expert’s there are few.”

Shunryu SuzukiZen Mind, Beginner’s Mind

If you are flying my plane, performing my surgery or repairing my car, I want you to have a darn good grasp of the details. True knowledge reigns supreme.

Before you deny rights to others–or steadfastly attempt to impose your opinions–you probably should be well versed in the facts. Ignorance is not bliss when it comes to how we treat each other.

But in a world where large and mounting problems linger, too often it seems as if all our experience isn’t helping very much. In fact, in the business world, it’s not hard to name dozens of once powerful brands that lost their mantle to inexperienced upstarts.

While the experts were all saying it couldn’t be done, the ignorant entrepreneur was out there doing it.

Once we tell ourselves we know what works, once we hear ourselves saying “we tried that before and it didn’t work”, once we have something we’re afraid to give up, the trouble begins.

And the door is opened to someone who doesn’t know any better.




Mr. Grey will see you now

Right or wrong.

Good or evil.

Risky or safe.

Work or play.

A success or a failure.

Known or unknown.

What the Bible tells us or not.

Loves America (or England or Brazil or wherever) or doesn’t.

Makes money or provides meaning.

Sinner or saint.

It’s a choice whether we wish to see the world as black and white. We can decide that it’s okay to live in the grey.

For me, there is a reason that grey is my favorite color. And it starts with accepting that dualistic thinking is a trap,  that my way or the highway rarely works and that there is beauty in imperfection.

Not to mention, sometimes blog titles don’t mean what you think they do.



Small is the new stupid

With e-commerce continuing to grow far faster than brick & mortar sales–and already comprising more than 10% of many brands’ total revenues–the implication seems to be that retailers need far fewer stores and that future locations should be considerably smaller. After all, simple math tells us that with shrinking physical store sales, average productivity will decline, thereby making each remaining store less profitable. Moreover, the logic goes, it is much smarter to offer a wider range of products via the web owing to the efficiencies of centralized inventory and the like.

In fact, the folks on Wall Street seem to think that this is not only obvious, but it is the only way for retailers to be successful in this brave new omni-channel world. Be careful what you wish for.

While it is quite apparent that, in aggregate, most North American and Western European markets are over-stored, it is dangerous for an individual retailer to assume that aggressively shrinking their physical footprint is the pathway to success. For one thing, for most brands, physical stores help drive the web business–and vice versa. Closing stores and editing assortments too ruthlessly can drive down brand preference and market share, which ultimately is likely to reflect negatively on total profitability.

But the biggest challenge for most retailers and their brick & mortar strategy is how to remain relevant and remarkable in a blended channel world and how to create compelling reasons for customers to traffic their stores when so much of everything is readily available on the web, often at a lower price.

The quest to get small through the relentless pursuit of store productivity tends to drive brands to carry only their known best sellers. The victims of this strategy are the new, the interesting, the differentiated. If stores are reduced to selling only the safe bets–only average products for the average customer–then the internet becomes the best way to discover the remarkable. Alternatively, specialty stores may emerge to attack the market opportunity vacated by the bigger chains, who keep planing the edges of what they carry to “optimize the box”.

Either way, a get smaller strategy may only serve to make a brand’s brick & mortar stores all that much less interesting and accelerate an already precarious position into a downward spiral.

Surely, for some retailers, a rationalization of their store portfolio is overdue and a radical re-think of their physical store model is an urgent and important need. Sadly, for others, getting small will only turn out to be incredibly stupid.


Because it’s 11:30

Saturday Night Live celebrated its 40 years on the air last night. As we all know, SNL has launched the careers of many now famous stars and created dozens, if not hundreds, of iconic moments. Its catch-phrases are legendary and the program’s effect on popular culture is hard to exaggerate.

At the same time, any regular viewer is well aware of the flubbed lines, missed cues and the outright lameness of an occasional entire episode. Casting decisions seem to range from inspired to “who was asleep at that audition?” For every genius sketch there is at least one “what the heck were they thinking when they wrote that?” moment.

I can only imagine the thousands of times that cast members, writers, producers and the director must have desperately wished for additional time to re-write something or do a few more rehearsals.

But as SNL founder and long-time producer Lorne Michaels has said: “The show doesn’t go on because it’s ready. The show goes on because it’s 11:30.”

SNL has brought us many incredible moments of entertainment, but it also teaches us some great lessons as well…

. . . to start before we are ready

. . . to err on the side of putting our art out into the world

. . . to realize that ‘this might fail’ and do it anyway

. . . to appreciate the power of the deadline

. . . to accept that sometimes the strangest idea can be the most powerful

. . . to ship, on time and often.

Now isn’t that special?

It’s 11:30. Let’s get out on that stage.

Everywhere. And nowhere.

You’ve probably read the admonishments. You must be everywhere your customer is: online, bricks & mortar, mobile, Facebook, Twitter, Pinterest and on and on.

You’re told the future is now and that future is all about allowing the consumer to shop anytime, anywhere, anyway.

You’re urged to create a seamless experience across all channels and touch-points.

And much of this is valid. If you don’t meet your customer where she is (and is headed), you’re very likely to be yesterday’s news (RIP Radio Shack). More and more, the consumer IS everywhere and channel hop is becoming the norm.

But for those who think that all they need is a little omni-channel pixie dust and a side order of frictionless commerce, think again.

In the rush to embrace all things digital, integrated and omni-channel, far too many brands have lost sight of the need to be relevant and remarkable. Most of the capabilities that industry white papers wax eloquent about–and consultants relentlessly peddle–are merely the new table-stakes. And, quite frankly, your mileage will vary. Perhaps a lot.

Sears has made huge investments to create powerful digital and integrated commerce capabilities. In fact, they are regularly recognized for their leadership position in many aspects of what industry pundits describe as the holy grail of everywhere commerce. So how’s that working out? Oh yeah, they forgot to sell stuff people want in the way people want it. This is certain to end badly.

On the other hand, Amazon has managed to become a retail industry behemoth, crushing competitors in its wake and continuing to gobble up market share, all without physical stores and, in many cases, putting forth a pretty lackluster mobile and social presence. Their lack of “omni” doesn’t seem to be slowing them down too much.

As I’ve pointed out before, the future of omni-channel will not be even distributed. For those brands that rush eagerly into the “everywhere retail” world without a clear view of the customers they wish to serve and how they wish to serve them in a relevant and remarkable way, don’t be surprised when you don’t get the ROI you hoped for.

It’s quite possible to be everywhere and nowhere at the same time.