Untethered

In the first decade of e-commerce’s ascension, with rare exception, the consumer was sitting in their home or office using a desktop computer to do their online shopping. It was a completely virtual experience where the advantages were clear: 24/7 access, wider selection, often lower pricing and so on. So were the disadvantages: inability to try on the product, no instant gratification, no sales help, etc.

Even as e-commerce began to chip away at brick & mortar stores’ dominance, the physical retail experience stayed basically the same. To reap the advantages of in-store shopping you had to travel to the store. Once there, if you wanted product information you had to track down a sales associate and hope that he or she knew what they were talking about. What you could buy had to be in-stock in that particular location. And when you wanted to buy something, you went to a sales register at the front of the store or located in a merchandise department.

With the explosion in mobile devices and smart phones the consumer decision journey is rapidly becoming untethered. Previously a digital shopping experience by definition meant you weren’t in (or close to) a store. But, more and more, what we once counted as an e-commerce shopping trip or sale, versus one made in a physical store, is a distinction without a difference. It’s now a bricks and mobile world.

Increasingly, store sales associates are untethered from their POS registers, lending them the ability to work with a consumer at the real point of sale and arming them with the digital tools that can meaningfully enhance the customer experience.

Today’s omni-channel leaders are keenly aware of how the un-tethering of retail is profoundly altering the consumer and competitive landscape.

For others–the relentless defenders of the status quo–it’s their thinking and willingness to act decisively that needs to be untethered. Hopefully that occurs before their business model becomes unhinged.

 

 

Points of need

It used to be if we needed to learn about a product we went to the store and talked to a salesperson. Or maybe we asked a friend for some advice. Or perhaps we picked up a copy of Consumer Reports to glean the editors’ opinions.

Most of the time, when we needed to actually buy the product, we headed on down to the store to make our selection and drive it on home.

The ways we could satisfy our needs were finite. We operated on THEIR schedule. The information was tightly controlled and pretty much one-way. The points of need were often defined by the rather limited points of sale.

Now there is an explosion of ways to satisfy our needs. And new needs–desire to socialize, give advice, serve as a curator, be seen as an expert, and so on–have been lifted up and activated.

For retailers, point of sale is being transformed.

The dramatic rise of newer, faster, smarter mobile devices is fundamentally changing the customer experience. Not some day. Right now.

This sea change allows for remarkable capabilities to be delivered at the intersection of point of need and point of sale.

Done right, you win. Done wrong, you’re toast.

To thrive in this brave new world YOUR need is to let go of your channel and product-centric thinking.

Your mission? Start with the customer. Focus on points of need. Dare to be different. Eliminate the friction. Rinse and repeat.

 

 

 

 

 

 

The Real Estate of the Mind

I’ve spent most of my career in retail. And most of that time we worried a lot about our physical real estate.

Site selection. Market footprint. Optimizing store layout. Co-tenants. Access. Egress. Signage. Developer contributions. Location. Location. Location.

Today, with fewer and fewer exceptions, brick and mortar retailers are closing stores and shrinking the foot print of individual sites.

E-commerce, social media and all things mobile, create a blur between places to browse, research, review, recommend and buy. The blended channel is fast becoming the only channel.

As leaders, we need our brands to embrace the blur, break through the clutter and command the consumer’s attention and trust. Anytime, anywhere, anyway.

Winning the physical real estate battle matters less and less. Winning the real estate of the mind, more and more.

The obvious obviousness of omni-channel

Sitting in sessions at last month’s NRF annual conference I might have thought a drinking game had launched where you would down a shot every time someone said “omni-channel” or uttered the phrase “seamless integration.”

Speaker after speaker–as well as subsequent press coverage–rattled off buzz-phrases, statistics and factoids regarding multi-channel consumer behavior as if this were some big new discovery or insight.

All this proved was one inescapable fact. There are two types of retailers in this world: those that have been paying attention and those that haven’t.

If you’ve been paying attention all of this has been obvious for years. If not, you are suddenly awakening to the cold harsh reality that you are behind. Perhaps way behind.

Any brand that has taken the time to understand consumer behavior already knows that consumers think brand first, and channel second. Any retailer that analyzes their customer data understands how digital commerce influences brick and mortar sales–and vice versa. Any company that has been willing to look, appreciates the large degree of cross-channel behavior that has been evident (and growing) for years.

It’s been more than 5 years since retailers like JC Penney, Sears and Neiman Marcus stated publicly that customers that purchase in 2 or more channels outspend single channel customers by a factor of 3 to 4X. In 2006–nearly six years ago!–my team did an analysis that showed that more than 50% of Neiman Marcus’ total sales (and a higher percent of profit) came from customers that purchased in multiple channels within a 12 month period.

The proliferation of robust mobile devices–smart phones and tablets–add more touch-points, new functionality and serve to further blur the lines between channels, while creating the need for more frictionless integration.

There is a big difference between a new reality emerging and your becoming aware of a reality that is already there.  And it’s dangerous to be confused about that.

Obviously.

 

The end of “same store sales”

For many years corporate leaders and industry analysts have made “comp” or “same store sales” their go to metric for the health of a retailer.

It’s time for a re-think.

For any retailer that is building out robust omni-channel capabilities, the lines between digital and brick & mortar are increasingly blurred. More and more, the web influences retail sales and stores help drive e-commerce business.

If a customer makes a purchase on their mobile device while at–or shortly after visiting–your store, is that a physical store sale or an e-commerce transaction? If a store sales associate finds a product from the on-line assortment to save a sale, which channel should get credit?

Customers shop brands, not channels or touch-points. Any marketing that builds your brand, drives customer engagement and activates a sale, helps all channels. Your job is to stop obsessing about channel attribution and make your customer experience as frictionless as possible.

If you do not know what percentage of what you call e-commerce sales comes from customers who are close to one of your physical stores, you need to get busy. And if you do not know what percentage of your customer base makes a purchase from two or more of your channels (stores, web, catalog) in a year, you will want to add that to your priority to-do list. FYI, at the last retailer I worked for, both of these numbers were north of 50%!

Once armed with this insight you will see why “comparable trade area sales” and “comparable customer segment sales” are something to start tracking. [And if you are an industry analyst, it's time to start asking the companies you follow how they are doing on these increasingly important metrics.]

Don’t forget, silos belong on farms.

The endless aisle and the world’s smallest parking lot

When I was in business school, one of the major consulting firms was notorious for asking interviewees the question: “what if energy were free?”  The short answer, of course, is “just about everything.” But the point of the question was to see if candidates could understand what a driving factor energy costs were in most businesses and consumers lives and whether the interviewees could quickly sort out the profound implications of no longer having that constraint.

I’ve been in retail about 20 years and for most of that time physical space has been the huge driving factor and constraint.

Retailers spend millions of dollars investing in stores and filling their shelves with millions of dollars in inventory. A lot of time and energy goes into visual merchandising and store display standards. Companies invest in planning and allocation software to optimize precious retail selling space and flow merchandise through their supply chains. You worry about things like “parking ratios” (the number of spaces you need per thousand of square feet).

And all along, Wall Street keeps you obsessively focused on comparable store sales growth, productivity per square foot and growth in square footage.

What would be different if most, if not all, of that did not matter anymore?

For more and more consumers, digital marketing and e-commerce has made the aisles endless and physical display meaningless. And the store is always open. Their parking lot is their desk chair, their couch, the smart phone or tablet in their hand. And your physical store is starting to look more and more like a showroom.

It won’t be long before most established retailers won’t be able to economically add any more net physical square footage. And if you are Barnes & Noble, the Gap, Sears or Best Buy, congratulations. You are already there.

If you are a multi-channel retailer where more than 10% of your sales are done through e-commerce and that channel is growing at double-digit rates, focusing on comparable store sales growth is becoming increasingly irrelevant. Comparable customer segment growth is far more meaningful.

If you have a lot of capital invested in physical stores and a large and growing percentage of your customers engage with your brand digitally before coming to your store, chances are you need a radical re-think about how you will drive brick and mortar productivity in an increasingly omni-channel world.

In a world of endless aisles and the anytime, anywhere, anyway consumer, just about everything is different. Or soon will be.

So the question is: are you?

 

 

Bring out your dead!

When I hear people proclaiming the death of catalogs or physical retail stores, I’m reminded of another classic scene from Monty Python and the Holy Grail.

There is no question that the traditional mail order catalog is moving toward extinction, and that a profound shift from paper communication to digital is occurring unabated. But without understanding how different customer segments use different types of media–and the interaction between multiple forms of customer communication–you are likely to shoot yourself in the foot.

Witness JC Penney’s blunder of exiting the catalog business only to discover the significant impact their catalogs had on their retail and e-commerce business. We made a similar mistake at Neiman Marcus when we gutted catalog circulation in a quest for cost savings. After enduring a big hit to both the web and retail business, we finally got smart and built a model to predict cross-channel impact from circulation decisions.

Someone should have been there to say “I’m not dead yet.”

Same song, different tune for brick and mortar stores.

Yes, there is an ongoing shift toward e-commerce, and yes, many powerful pure-play models are thriving. This too will continue. But to declare an end to physical retail is both silly and dangerous.

There are plenty of retailers successfully opening new physical locations. And many of the most powerful retailers today are those who understand that most customers prefer to shop both on-line and in physical stores. A deep understanding of customer behavior, frictionless integration between channels and a commitment to treat different customers differently is what wins.

Maybe it is human nature to make gray situations, black and white. Maybe when we see something as mortally wounded it’s in our DNA to club it to death.

But the next time you want to pronounce a wounded concept or program dead, take a hard look at reality starting from your customers’ point of view. Maybe now is the time for a reinvention rather than a funeral.

 

The blended channel is the only channel

For quite some time, various executives and so-called gurus have been going on and on about “multi-channel” this and “multi-channel” that.

In fact, it’s hard to get through a discussion–or speech or consulting report or white paper or blog posting–on multi-channel strategy without buzzwords aplenty.

“Seamless integration.” Check.

“360-degree view of the customer.” Check.

“Consistent communications across channels.” Check.

“Customer-centric approach.” Check.

And so on.

Enough already. It’s time we stop thinking “multi” and start thinking “blended.” Customers don’t think in channels and neither should you.

Customers think about brands and experiences, not about how you happen to be organized or choose to keep score. More and more, consumers move from one medium to the next in a nano-second.

For the customer standing in your store, using their mobile device to check your prices on one site and garner product reviews on another–and then placing an order from your competitor because you don’t compare favorably–the notion of multiple channels seems silly and arcane. They all blend together.

Today the blended channel is the only channel.

Shrinkage. Be prepared for more cold water.

Yesterday Best Buy announced its plans to shrink its U.S. big-box square footage by 10% to compete more effectively with Amazon and other digital competitors.

Expect to hear more announcements like this–at least from those retailers who get how hard the winds of change are blowing for brick and mortar retailers. Physical retail is not going away, but the assortment and prices advantages of pure play e-tailers are overwhelming for more and more consumers.

For retailers that do not offer a compelling omni-channel strategy the writing is on the wall.  They have too many stores and the stores they have are too big. They risk becoming showrooms for consumers that ultimately will buy on-line or from more price competitive and more convenient brick and mortar competitors.

For some, all is not lost. Smart investments in a seamless cross-channel “bricks and mobile” offering can allow them to capture customers regardless of which channel they prefer. Instead of investing in building more and bigger stores, they should invest in making the stores they have more relevant and differentiated, taking advantage of the unique capabilities of a physical location. There are plenty of customers willing to shop in stores with great design, great service and an overall remarkable experience.

For others, the future is bleak. For them, I’m reminded of the memorable line from the movie The Sixth Sense.

“I see dead people.They only see what they want to see. They don’t know they’re dead.”