Small is the new interesting

It’s been at least 20 years now that most value creation in retail has been driven by big. Big stores–both physical and digital. Big assortments. Big advertising.

Walmart and Target. Home Depot and Lowes. Amazon and eBay. Best Buy, Ikea, Office Depot and on and on. Superstores, category killers and the “endless aisle” online guys have won big (heh, heh) on scale, efficiency and low prices.

There’s a lot to be said for pushing the frontiers of big. When your goal is to be the “we have everything store” your marching orders are pretty clear. When you have to be the winner in a price war, your focus is obvious.

The problem is that big has its limits. And a closer examination of many “winning” retailers’ strategies reveals that big is losing momentum.

It turns out that a strategy of big eventually faces diminishing returns. It turns out that most of the winners of the past decade or so are running out of new stores to build. It turns out that many of the mass promotions that drive incremental business lose money. It turns out that for most of these brands e-commerce growth is unprofitable. But mostly it turns out that big is boring. And consumers are starting to notice.

There’s no question that big is here to stay. There’s little doubt that for many consumers–and a vast number of purchase occasions–the quest for dominant product selection, convenience and great prices will remain paramount. But that doesn’t mean that’s where the future opportunities lie or that your strategy shouldn’t shift.

Shift happens. And it’s a shift away from mass marketing to becoming more personalized. Away from overwhelming assortments to editing and curation. Away from products that everybody has to items and experiences that the consumer creates. Away from the seemingly inevitable regression towards the mean to a deliberate choice to eschew the obvious and explore the edges.

Many brands will have a hard time breaking out of the pursuit of big. They are too vested in building scale, too scared of Wall St.’s reaction to a strategy pivot, too addicted to mass advertising.

Of course, therein lies our opportunity. Maybe it’s time to embrace small while the rest of those guys continue to flog big.


Whose idea of stupid?

Since we seem to be a society that judges quickly, we often waste little time affixing all sorts of labels to all sorts of people and all sorts of situations.

That guys a loser (not to mention low energy).

We tried that before.

This will never work.

Your idea is stupid.

To be sure, there’s no shortage of dumb ideas. Yet sometimes stupid wins.

Facebook and Amazon were once pilloried as concepts that couldn’t possibly work. When Google started it was the 20th search engine to launch and completely lacked a revenue model. It also followed in the footsteps of several high-profile flameouts.

Tesla, Instagram and PayPal were all once seen as pretty ridiculous business models by just about everybody.

Psychologists talk about “projection”–the notion that when we feel the need to point out the failings of others it’s often rooted in our own insecurities. “If you spot it, you got it” as some like to say.

Sometimes there is stupidity in the world that needs to be called out and confronted.

But sometimes it’s better to judge slowly.

Sometimes it’s better to realize innovation frequently happens at the razor’s edge of stupidity.

And sometimes you just need to consider the source.

The places that scare us

“A further sign of health is that we don’t become undone by fear and trembling, but we take it as a message that it’s time to stop struggling and look directly at what’s threatening us. ”
― Pema Chodron, The Places that Scare You 

Halloween is an interesting tradition.

While there is some debate as to its precise origins, by now we’ve mostly come to see Halloween as a fun way for kids to dress up and score some treats and for everyone to playfully indulge in fantasies of terror and some rather benign scariness.

Perhaps the construct of a day focused on “safe” fear is a way to channel both the conscious and unconscious reality that we live in a pretty scary world and that most of us experience fear each and everyday.

Fear of failure.

Fear of rejection or abandonment.

Fear of injury or death.

Fear of being discovered for who we really are.

The truth is that there are plenty of places that scare us and once the make-believe of Halloween passes, those thoughts and feelings will still be there.

The only way to conquer our fears is to confront them. The only steps that work are awareness, acceptance and action. The only path is through, not around.

When the shift hits the fan

Shift happens. And it’s never been more expansive and dynamic.

The shift from brick & mortar to e-commerce.

The shift from “going online” to living online.

The shift from traditional media consumption to a digital first model.

The shift from silo-ed customer experiences to harmonious ones.

The shift from highly intentional shopping to more spontaneous “micro-moments.”

The shift from isolated customer journeys to those that are deeply connected.

The shift from brands’ being in control to empowered consumers who are increasingly calling the shots and dictating their requirements.

The shift from one-size-fits-all to highly personalized interactions and marketing. The end of mass, the beginning of us.

Confronted with these profound shifts, the tendency of many organizations is to go on the defensive. Overwhelmed by the shifting tides–and afraid to take risks in a fast-moving and highly uncertain environment–they circle the wagons to fight the changes or develop plans to cope with them. But survival is not enough.

When shift happens our goal has to be to understand it, to accept it and to go through it rather than around it. We must embrace it in a desire to thrive, not simply survive.

And most importantly, we need to get out in front of it well before it hits the fan.

H/T to Seth

No new stores ever!

What if your company could never open another store? I’m not talking about relocations. I mean a truly new unit that adds top-line growth for your brand.

That’s pretty much the case in the US department store sector. Macy’s, JC Penney, Dillard’s and Sears (obviously) are closing far more full-line stores than they will open.

The generally more resilient luxury sector isn’t exactly booming. Nordstrom will open only 3 new stores in the US over the next 3 years. Neiman Marcus will open 2 full-line stores over 4 years. Saks is probably done finding viable new locations. It’s hard to imagine how this current outlook will get better.

Major sectors like office supplies and specialty teen are going through wrenching consolidations and hemorrhaging sites. And for every Dollar General, Charming Charlies and Dick’s Sporting Goods that have decent opportunities for regional expansion and market back-fill, there are far more that have overshot the runway.

“But Steve”, you say, “we’re seeing great growth in our online business. That’s our future.” That may be true, but how much of that is actually incremental growth? For most “omni-channel” retailers–particularly those that aren’t playing catch up in basic capabilities (I’m looking at you JC Penney)–more and more of what gets reported as digital sales is merely channel shift.

In fact, you don’t have to be Einstein to understand what’s going on when brands report strong e-commerce growth, yet overall sales growth is barely positive. For a great discussion of this check out Kevin’s blog post on hiding the numbers.

The fact is we have too many stores and most consumers have too much stuff.

The fact is the retailers that operate the most stores and sell the most stuff are rapidly reaching the point where, for all practical purposes, they will never open a new store.

The fact is very few large retailers are experiencing much incremental growth from e-commerce and, either way, that growth is small relative to their base and beginning to slow substantially.

The fact is, going forward, most brands will only grow the top-line above the rate of inflation by developing strategies that steal market share. And the me-too tactics and one-size-fits all customer strategies that currently account for the bulk of most brands time and money simply won’t cut it.


When the oxygen leaves the room

In the Republican Presidential race Donald Trump and Dr. Ben Carson are sucking up virtually all the oxygen in the room. It may be for reasons that suggest mass psychosis, but I digress. The fact is that news of their campaigns dominates the airwaves and most political conversations, leaving little or no space for other candidates to garner attention, much less gain any real traction.

During my time at the Neiman Marcus Group, the vast majority of the oxygen was consumed by our hyper-focus on growing profits with our very top-tier customers–mostly through price increases–and executing our current operating strategy. There was little oxygen left for cultivating other important customer groups or working on the new ideas that a maturing business would need to gain share. It’s not terribly surprising that those initiatives withered on the vine. Nor should anyone be shocked that today’s growth pipeline is sparse and the company is now focused on cost-cutting.

Since Eddie Lampert has helmed Sears Holdings, his focus has been on extracting cash from many aspects of the core business, while throwing money at various vague digital initiatives, creating a culture of internal competition and his crazy notion of Sears’ becoming a “membership” company. The oxygen needed to fix the basic issues in Sears value proposition has never been there. This is certain to end badly.

Of course, this notion extends well beyond business strategy.

When protection of ego and the need to be right consumes most of the oxygen in the room, there is little or nothing left for connection.

When we are focused on judgment or condemnation of others, compassion has no room to breathe.

When we stoke the flames of hate, the fire of love goes out.

It’s easy to say we don’t have the time, money, skills or energy to do otherwise. But, for me, it’s really pretty simple.

Sometimes we are the ones sucking the oxygen out of the room through the example we set and the actions we take. It’s a choice–our choice–to stay on that path.

Sometimes the oxygen is being sucked out of the room by others. And sometimes, despite our best intentions and strongly held hopes that it might change, the stark reality is it won’t.

The only answer then is to leave the room.

99 problems but a botch ain’t one

For many of us, it’s so easy to identify with a story about all of our problems. My boss is a jerk, it’s too hot, I’m so busy, my back hurts, allergies are really bad this year, this idiot cut me off in traffic, and on and on.

In this line of thinking, stuff happens and somehow or other we’re a perpetual victim. Who cares that much of this is out of our control or that few of these situations truly arise to being much of a real problem at all. Indeed, to paraphrase Eckhart Tolle, “the problem is not the problem, the problem is our thinking about the problem.”

Yet, for me, it’s interesting how rarely our narrative includes owning up to a botch, a blunder, a mess we made, our glorious failure or bungled experiment.

Sometimes it’s just too painful to admit we took a chance and it didn’t work out.

Sometimes we’re scared to say “here I made this” and face criticism or outright rejection.

Sometimes, we conveniently ignore our role in a less than desired outcome.

Of course, sometimes there can be no botch, because we took no risk. The fact is it’s almost always easier to do nothing.

Growth doesn’t come from rehashing life’s little inconveniences or slights. It comes from taking the leap and exposing ourselves to the harsh light of both the tribe and the trolls. It’s not about trying to avoid the botch, it’s about being prepared to fail, fail again and fail better.

Ultimately we must make a choice. Will it be “V” for victim or “V for Vulnerable”?