Push “blend”

It wasn’t very long ago that engaging with most brands meant dealing with their disparate pieces. One 800 number for order status, a different one for delivery. Websites and physical stores that often bore only a passing resemblance to each other. Getting bounced from one department to the next to resolve a customer service issue or get a question answered. And then needing to start over again with each person with whom we spoke.

Then–slowly at first–some companies began to realize that customers didn’t care how we were organized. Customers didn’t want to hear about the limitations of our “legacy systems.”  We may talk about channels, but customers don’t even know what that means. And they don’t care.

Upstart brands challenged the incumbents by attacking the friction in consumers’ path to purchase. Companies as diverse as Nordstrom, Amazon, Bonobos and Warby Parker made it their job to integrate the critical pieces of the shopping experience on behalf of the customer. They challenged the traditional verticality in retail and embraced the notion that brands are horizontal.

They assembled great ingredients and then they pushed “blend.”

As retailers we may be organized by the parts and the pieces. We may make decisions on discrete components. We may measure and tweak each variable in the equation.

But at the moment of truth, when the customer decides to enter our store, click on an ad, put another item in their cart or recommend us to a friend, she’s thinking about the whole blended concoction.

 

 

Where everybody knows your name. The “new shopkeepers.”

More and more the retail world is bifurcating.

At one end of the spectrum, you have the high-efficiency players. Great prices, endless assortments, super convenience, built for speed. Amazon, Walmart, iTunes, Home Depot. You get the picture.

While each go about it slightly differently, their world is mostly a mass market one. Customer segmentation means little. For all intents and purposes, you shop there anonymously.

At the other end of the spectrum are what I like to call the “new shopkeepers.” In the (good?) old days retail was characterized by owner-run, single location, small specialty shops. The butcher, the baker, the candle-stick maker. No CRM system was needed because the shopkeeper knew you, knew what you liked and she tailored her assortment and experience to you and her other like-minded customers.

We know that very few of these old-timey shopkeepers are around any more. But the new shopkeepers embrace the fundamental principles of old. Deep customer insight. Remarkable experiences. Relationships, not transactions. They treat different customers differently. They know your name.

Your mission–if you choose to accept it–is to pick a lane. Too many retailers straddle the line, trying to be something for everyone and ultimately being totally unremarkable and eventually irrelevant.

If you can’t out-Amazon Amazon–I’m looking at you Best Buy!–you had better move strongly to the other end of the continuum. You had better embrace all things customer-centric.

I’d get started if I were you. You have a lot of names to learn.

The end of e-commerce

We’ve gotten pretty used to talking about e-commerce and brick & mortar retail as if they were two entirely separate things operating in parallel universes. In fact, industry commentators often treat the “on-line shopper” as some sort of new species.

Yet more and more the notion of e-commerce as a channel unto itself is collapsing. A distinction without a difference.

Yes, some on-line only businesses like Amazon will continue to thrive, and no doubt we will continue to see purely digital retailers launched. Some will carve out profitable niches.

But with few exceptions, the real action–and the biggest source of future growth–lies with omni-channel retailers, that is, those brands with a compelling presence in brick & mortar and on the web (and mobile, and social, etc.).

When the media quotes the rapid growth of e-commerce, don’t forget that much of that growth is fueled by the digital operations of traditional brick and mortar players such as Macy’s, Best Buy and Neiman Marcus.

The reasons for this are simple. Consumers think brand first, channel second. Consumers use multiple touch points on their purchase decision journey. More and more, consumers value the unique convenience of on-line shopping, but often will appreciate the unique benefits of a physical store.

Forward thinking omni-channel retailers like Nordstrom have stopped breaking out the sales of their e-commerce division and their brick and mortar stores because they accept the idea that the distinction is increasingly meaningless. More importantly, they act on this insight and have worked hard (and invested mightily) to eliminate shopping friction and make their brand available anytime, anywhere, anyway.

So forget e-commerce and brick & mortar. Stop with the separate P&L’s, non-sensical incentives and channel-centric customer analysis.

Put the customer at the center of everything you do, and build from there. Rinse and repeat.

 

 

 

 

 

When the last 15 years happens to you

If you are in retail, the last 15 years or so have brought enormous change. Let me call out a few profound shifts:

  • Winning business model bifurcation: Price and dominant assortments at one end (Wal-mart, Amazon); remarkable experience and assortment curation/product differentiation on the other (Nordstrom, Louis Vuitton). The result is death in the middle.
  • Digital retail: What started as an electronic catalog is now not only a high growth channel approaching 10% of many categories’ sales–and much higher if the product can be delivered digitally–but an increasingly important medium for promotion, interaction, customer reviews, price checking, etc.
  • The constantly connected–and inter-connected–consumer.  As more and more consumers are armed with powerful mobile devices the notion of anytime, anywhere, anyway retail has become a reality–and expectation. Social networking, product review sites and pricing apps are creating greater and greater information transparency. The brand is no longer in charge. The consumer is.
  • The omni-channel blur. Most of your customers will engage with multiple touch points in their decision journeys. As mobile commerce grows–and it becomes easier for consumers to seamlessly move between various applications to gather product information, check prices, confirm inventory availability, get product reviews and the like–the notion of distinct channels breaks down. It’s a frictionless, compelling experience that matters, not making each of your channels better. New ways of consumer engagement, new ways of organizing your business, new ways of measuring and incentivizing become mandatory. Silos belong on farms.

While it is true that remarkable new business models sometimes emerge quickly and unexpectedly, most winning concepts that have gobbled up market share from industry incumbents did not come out of nowhere.

Amazon launched in 1995. The off-the mall and specialty formats that have made life difficult for the Sears’ and JC Penney’s of the world have been important competitors since the late 1990′s. Anybody paying any attention to customer data during the last 10 years has known that the so-called “multi-channel” customer outspends a single channel customer by a factor of 3-4 times.

With the benefit of 20/20 hindsight it’s clear that many Boards and many retail executives were asleep at the wheel. They failed to gain sufficient awareness of the competition and seek truly actionable customer insight. They failed to accept what was happening. And of course they failed to act. And now it’s too late.

So here’s the new reality. While many of the companies I mentioned–and countless more I’m sure you can offer up–had some 15 years to see what was happening and make the necessary changes, chances are you will have less time. A lot less time.

So I guess the question is: what are you going to do to make sure the next 5 years don’t happen to you?

 

Let’s get digital…digital

The first wave of digital retail was either about brands with a history in catalog merchandising putting up a basic e-commerce site (Williams-Sonoma, Lands’ End) or pure-plays picking off products categories that early adopters could readily embrace (Amazon). The market dealt harshly with models that could not execute a basic direct-to-consumer formula, targeted a product category that wasn’t ready for digital prime time (RIP pets.com) or a combination of both.

As consumers became more comfortable with buying on-line–and retailers got better at deploying new technologies–other categories made sense for pure-plays (Blue Nile, Zappos) and traditional retailers ramped up their multiple channel strategies. For most, this second wave was largely a silo-ed approach with the e-commerce and the bricks and mortar divisions pursuing related, but mainly independent, strategies.

In the most recent third wave, a few retailers (I’m looking at you Nordstrom) understood that most of their customers were interacting with their brand across multiple channels and touch-points. They accepted that brand trumps channel, that digital was transforming their business forever. They declared that silos belong on farms and began investing in a more integrated, customer-centric experience, leading with digital more often than not.

In the next wave, the blended channel is the only channel. The distinctions between devices, channels, touch-points and media begin to blur. Differences with little distinction. Or differences that lead to extinction if your core value proposition can be delivered better, cheaper, faster digitally.

Clearly not every product category is going completely digital. Groceries looks pretty safe. Cars too.

But failure to understand how digital transforms the customer discovery, engagement, purchasing, retention and advocacy process is a prescription for your brand’s demise.

So let’s get digital. Let me hear your actions talk.

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.”