An end to omni-channel?

I have a little confession to make.

Despite my including “omni-channel” liberally in speeches I give, in the hashtags of my tweets and in my often shameless self-promotion of my alleged retail strategy and marketing expertise, I kind of hate the term. Here’s why.

First, it’s hardly a new concept or a revelatory insight. I was leading the “anytime, anywhere, anyway” initiative at Sears in 2001 (not a typo). Companies like Nordstrom, Williams-Sonoma, REI and Neiman Marcus, among others, have been working in earnest on the essence of cross-channel integration and customer-centricity for more than a decade. If a brand has started throwing out the term in their annual priority statements and investor presentations more recently–or injecting it into the titles of staff members–it only means that company was late to the realization that it mattered, not that they are some kind of innovator or industry savant.

Second, it’s vague. As it’s applied relentlessly in retail do we ever actually mean “all”? Home shopping? Cruise ships? Military bases? University book stores? Of course not. Good strategy is rooted in choice, not trying to do it all. It’s not enough to say we’ve embraced all things omni-channel. In fact that’s quite sloppy and unhelpful. We need to lay out the customer relationships that are essential to our brand, the channels that matter for them and what we are doing specifically to eliminate the friction–and amplify the intensely relevant and remarkable–in their experience.

Third, it’s over-used. At conferences, in white papers and among industry observers it’s a virtual hype-fest. It often seems as if certain brands think that if they say “omni-channel” enough their needed (or hoped for) capabilities will magically appear. In my experience if a company is throwing around jargon a lot there is a pretty good chance it’s to obfuscate their lack of strategic clarity and/or executional progress.

Lastly, and most importantly, by itself becoming “omni-channel” is simply not good enough. Regardless of exactly what a brand means when they extol their omni-channel strategy, capabilities like cross-channel inventory availability, order-online-pick-up-in-store, and a host of other functionality that add up to the much vaunted “seamlessly integrated” experience, are rapidly becoming table-stakes, not differentiators.

Certainly retailers must root out the friction in their customer-facing processes and strive for a one brand, many channels experience. But they also need to accept that the power has shifted to the consumer and it’s become much harder to get a brand’s signal to command attention amidst all the noise. The reality is that in a slow growth world, more and more, sales increases must come from stealing share from the competition and mass, one-size-fits-all strategies are rapidly dying. Without making customer insight a core capability–and adopting a treat different customers differently commitment–market share losses and shrinking margins are almost certain.

Ultimately, I don’t care if you use the term “omni-channel” so long as you are clear about exactly what you are doing, how it benefits your efforts to retain, grow and acquire your core customers and why, when successful, it will be truly remarkable. But I’d also like to hear an acknowledgement that those efforts are simply necessary, not sufficient, to win in an ever noisier, customer empowered, slow growth world.

Sears: The World’s Slowest Liquidation Sale (Redux)

Today Sears Holdings reported comparable store sales decreases of 10.9% and its twelfth straight quarterly operating loss. And when we are reminded that despite a decade of Eddie Lampert’s leadership there is still no articulated–much less viable–strategy to turn the retailer around, another cash raising tactic is highlighted to distract from the brutal reality of the approaching cliff.

Long time readers of my blog know that I’ve taken Sears leadership to task multiple times over the past several years. And I will readily admit that I am guilty of piling on. But should you be desperate for entertainment, here are a few of my diatribes:

The original: Sears: The World’s Slowest Liquidation Sale

The deliberately provocative: 5 reasons why Sears should liquidate ASAP

And my increasingly prescient: Sears: It’s even worse than you think.

By now, it’s hard to imagine that anyone buys the notion that the growing percentage of Sears Shop Your Way customers has anything to do with the retailer becoming more customer relevant–much less profitable. By now, I would hope it’s obvious that Sears cannot possibly cost cut its way to prosperity. By now, everyone should see that without unprofitable discounts, Sears is unable to even maintain market share.

Most critically, Sears is quickly falling–or has fallen–below a critical mass on a number of dimensions:

  • Number of stores to remain a viable national omnichannel retailer
  • Production volume and outlet distribution for its key proprietary brands (Kenmore, Craftsman, DieHard)
  • Selling space and differentiated product offering needed in most categories to remain competitive.

To maximize the prices he can fetch through an orderly liquidation, I suppose Mr. Lampert has to maintain the illusion that Sears can remain a going-concern national retailer. Let’s just not forget, that it is only an illusion. And he had better hurry.

Dead brand walking.

The problem with saying “no”

During the past 25 years Sears had at least three opportunities to transform itself by entering the home improvement warehouse business (I worked on two of them). This was probably the only way Sears was going to ultimately survive and unlock the value of its franchise Kenmore and Craftsman brands. Each time the answer was “no.”

When I headed up strategy at the Neiman Marcus Group (2004-08), we evaluated building a leadership position in omni-channel by consolidating our disparate inventory systems, we recommended moving from a channel centric marketing organization to a customer and brand focused one, we proposed aggressively expanding our off-price format and, having understood the share lost to competitors like Nordstrom, we analyzed improvements to our merchandising and service models to become a bit more accessible. Ultimately we said “no” to moving ahead on all of these. Years later, these strategies were ultimately resurrected. But the opportunity to establish and extend a leadership position may have been lost.

Obviously there are plenty of times when either the smart or moral thing to do is to say ‘no.” Obviously it’s easy to look back and say “I told you so.”

Yet systemically, most organizations are set up to reward the status quo (often cost containment and driving incremental improvement) and punish the well intended experiment. So it’s easy to say “yes” to the historically tried and true and “no” to just about everything else.

Of course we don’t have to look very hard to come up with brands that have been struggling for many, many years (Sears, JC Penney, Radio Shack) or have completely imploded (Borders, Blockbuster, etc.). All of these said “no’ to any number of potentially game-changing strategies along the way. Care to hazard a guess at how many long-term Board Members of these perennial laggards and outright losers got pushed out for saying grace over a series of crippling “no’s”? How many CEO’s had their compensation whacked for never missing an opportunity to miss an opportunity?

In a world where change is coming at us faster and faster, we need to be challenged just as much on what we are saying ‘no” to as we are on what gets a “yes.”

And If you think there is always time to fix the wrong “no” decision, you might want to think again.

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.


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.

Overplaying our hand

We’re told to hyper-focus on our core customers. After all, doesn’t most of our profit come from a small group of loyalists and “heavy-users”?

We’re admonished to double-down on our highest ROI marketing strategies. Surely if a moderate amount of email or direct mail or re-targeting is working, more must be even better, right?

And exhortations to find our strengths, exploit our core competencies and “stick to our knitting” are central to many best sellers and legendary Harvard Business Review articles

Lather, rinse and repeat.

And this all makes a lot of sense. Until it doesn’t.

The past few years have brought us dozens, if not hundreds, of brands that have gone away–think Blockbuster, Borders and, very shortly, Radio Shack–largely through adhering to these notions.  Still others sit on the brink of irrelevance–I’m looking at you Sears and Blackberry–because they pushed a singular way of thinking well past its expiration date and, sadly, the point of no return.

Even far stronger and far better managed brands fall into the trap of overplaying their hands. Neiman Marcus (my former employer)–along with many other luxury brands–have had to re-work their strategies because they became overly reliant on a narrow set of highly profitable customers and failed to acquire and retain other important and emerging cohorts.

It’s all too easy to become distracted by peripheral issues or to stray into areas where we have few useful capabilities. We always must be mindful of where the customer gives us–or where we can readily earn–permission to go.

But in a world that is changing ever faster, and where new competitors can often launch highly disruptive business models in short order, what got us to where we are isn’t likely to get us to where we need to be.



Zombie retailers

As we enter the home-stretch of the holiday shopping season, the winners and losers grow more obvious by the day.

Also increasingly obvious is a sub-category of retail brands that can best be labeled “zombies.”  This sad lot includes brands that may appear to be alive, but for all intents and purposes are already dead. Radio Shack and Sears find themselves at the top of this list, but they are hardly alone.

The retail graveyard is filled with well-known and formerly sizable brands that once had customers beating a path to their doors. Borders, Linens & Things, Blockbuster, CompUSA, just to name a few, have all disappeared in recent years. Coldwater Creek and Delia’s are two once successful companies that have initiated liquidation procedures just in the last six months. The new year will surely bring a raft of store closings and bankruptcy filings.

Much more recently founded pure-play e-commerce sites aren’t immune from this phenomenon either. Many once seemingly promising ventures have gone under or seen their valuations pummeled (I’m looking at you and Ideel). Many more are struggling mightily to find a pathway to profitability and are starting to see their venture capital sugar daddies lose patience. As it turns out, selling at a loss and trying to make it up on volume doesn’t work on the internet either. Their “zombie-ness” may not yet be apparent, but it’s there.

The seismic changes affecting the entire retail world are so profound and, in many cases, have come on so quickly, that it has been impossible for even the leaders to respond effectively. Yet, the brands that have gone under, and those that are not far behind, have all made a few common mistakes:

  • They either lacked deep customer insight or were unwilling to act on what that insight told them
  • They were afraid to compete with themselves by aggressively embracing (organically or through acquisitions) new formats and concepts that were gobbling up market share
  • They became overly focused on cost-cutting and store closings as the path to prosperity rather than doubling-down on customer engagement and growth
  • They protected their older, core customers while failing to acquire a sufficient number of new customers
  • They often chased revenue without an eye on profitability
  • They didn’t realize that customers buy experiences and solutions, not just the products that comprise them.

I suspect that when the post-mortem is done on next year’s zombies that transcend to the great beyond our autopsy will reveal similar patterns.

Clearly–and sadly–many retail brands are now beyond repair. For those that are struggling but still have hope, the real question is how many of these very familiar mistakes they will keep making.