Retail

Despite Amazon tire deal, talk of a Sears turnaround is just hot air

Having spent 12 years of my career at Sears, I find it particularly sad to see the once-storied retailer sink slowly into oblivion in what I frequently refer to as the world’s slowest liquidation sale. Equally troubling is the continued efforts by Eddie Lampert, chairman and CEO of Sears Holdings SHLD +8.72%, to suggest a transformation is still possible. As I have written before — and there is no nice way to say this — you’d have to be either gullible or stupid to believe that anything resembling a turnaround is in the cards.

So from a “Can Sears be saved?” point of view, despite the short-term pop in the stock price, there is nothing remotely hopeful in last week’s announcement that will start selling Sears’ tires. As with last year’s similar Kenmore deal, Sears may slightly delay the inevitable, but Amazon is likely the real winner.

Having held the title of vice president for corporate strategy at Sears at one point, I know that its private brands (and the services that surround them) once represented the core of Sears’ consumer and shareholder value. Set the wayback machine to 15 years or so ago, and brands like Kenmore, Craftsman and DieHard collectively were worth many multiples of what Sears Holdings in its entirety is worth today. Starting in the mid-1990s, as Sears lost market share to category killers such as Home Depot, Lowe’s and Best Buy, the value of these proprietary brands began a pronounced and prolonged descent.

Since Lampert has owned and run Sears, it has only gotten worse, as nothing of any consequence has been done to reverse the retailer’s overall fortunes. Simply put, the value of these brands continues to decline as Sears shrinks.

At this point, almost anything that expands distribution and generates cash is probably worth doing. Opportunities to have struck a grander bargain with those omnichannel brands with the best distribution power, market share and growth potential — which my team aggressively explored in 2003 — have long since passed. These retailers frankly don’t need anything material from Sears anymore.

For Amazon, however, this makes good sense. First, Amazon does not have a significant position in the tire category. Second, as with the Kenmore deal, Amazon gets access to a well-known brand and related services at what is likely to be at or near fire-sale prices. Third, we already know that Amazon is starting to push an aggressive private-brand strategy, and this gives it a decent jump-start in a sizable segment. And while selling Sears’ house brands is not exclusive right now, for all intents and purposes, it may be in the not too distant future as Sears continues to close stores and struggles with its own e-commerce offerings. Lastly, given its scale and scope, Amazon can well afford to do some experimentation.

Importantly, this particular deal is different from the Kenmore partnership in that it drives sorely needed traffic to more than 400 Sears’ Auto Centers. However, the likelihood that this traffic is material, particularly as Sears continues to shrink its fleet, is relatively small. Still, clearly every little bit helps, particularly when Sears is faced with so few viable alternatives.

From an Amazon perspective, even if Sears Auto Centers shrink considerably — or go away entirely — it has started to build category knowledge and insight to inform future bricks-and-clicks partnerships and/or the opening of its own physical stores.

As Sears’ market position continues to deteriorate, moves such as these smack more of desperation than the renaissance that Lampert et al. would like us to believe. Don’t be fooled. While it turns out there are still a few worthwhile assets within the Sears portfolio, the cupboard is growing increasingly bare.

Tick tock.

sears auto center closing Best of Store Closings by Date and Final Going Out of Business Sales Last Days

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

On May 22nd I will be doing the opening keynote at Retail at Google 2018 in Dublin. For more on my speaking and workshops go here.

Innovation · Inspiration · Life Lessons

Out of ignorance or fear?

There are all sorts of reasons we stay stuck, fail to take action on the things we tell ourselves really matter, spin on items big and small.

Whether it’s deepening (or ending) a personal relationship, finishing our book, quitting a soul-crushing job or starting that new business we keep talking about, there is an aspect of our evolutionary biology that holds us back.

Vulnerability is scary.

Bringing our ideas, wishes and dreams into the light risks criticism–or even ridicule.

All too often, The Resistance is real.

Half the battle in overcoming our fears is to accept the reality that we crave both growth and safety at the same time. Yet there is simply no talking ourselves out of the fact of our hard-wiring. Our job, then, is to learn how to quiet the lizard brain and press on.

Ignorance is a different matter entirely.

Ignorance is often a major contributor to stoking our fear and anxiety. One needs neither an advanced degree–or any degree at all–nor dedication of substantial time and effort to see how much our society is burdened by irrational fears borne largely out of misinformation, misunderstanding and verifiable mistruths.

The fact is, in the developed world at least, most people have plenty of access to all the information they need to be reasonably well informed. Most folks have the tools to apply a decent level of discernment.

If it matters to you and you don’t know, your ignorance is a willful act.

In fighting our stuckness, in being willing to put our art out into the ether, in exposing who we are to another person, in contributing to a better world, it’s important to understand what holds us back.

Fear is a dragon to slay. Ignorance is a choice.

 

This post was simultaneously published on my more spiritually driven blog I Got Here As Fast As I Could.

e-commerce · Retail · The Amazon Effect

Is Amazon finally getting serious about retail profitability?

There seems little doubt that Amazon.com AMZN -0.27% is crushing it and Macy’s is flailing. So who has the best profitability? Well, it’s not even close.

Macy’s operating margin is just over 6%. In recently reporting what was widely seen as a blowout quarter, Amazon is just now approaching a whopping 2% in its non-Amazon Web Services business. By just about any comparison, in most categories, Amazon’s margin performance appears to be anywhere from lousy to lackluster, despite its vast capabilities and more than 20 years of working hard at most of it.

One particularly disturbing trend is rising shipping and fulfillment costs. With Amazon’s massive scale, you might think this would be a growing source of profit leverage. You’d be wrong. Logistics costs continue to rise faster than revenues.

This is not terribly surprising. The structure of Amazon’s Prime program (which recently surpassed 100 million members) essentially encourages customers to overuse “free” shipping for frequent small orders—which generally have low (or non-existent) profits. Amazon also continues to aggressively push same-day delivery, which, at current scale, has terrible marginal economics.

Amazon’s growing success in apparel may be great for the top line, but returns and exchanges tend to be much higher than average, pushing supply chain costs further in the wrong direction.

Before anyone quibbles with my high-level analysis, I will state that I know the company has been making substantial investments for the long term. I realize that there are many instances where Amazon could make more money but it continues to prioritize market share gains over decent (or any) near-term returns. And I understand that Wall Street clearly values growth over profits. Yet against this backdrop, it does seem as if there is a subtle shift in focus.

Given the significant headwinds from growing logistic costs, the fact that profits improved dramatically suggests that both product margins and non-logistics operating costs are starting to be leveraged in more powerful ways. Moreover, in what some see as a risky move—but I see fundamentally as an acknowledgement of customer loyalty, pricing power and a growing need to offset spiraling delivery costs—Amazon is raising the price of Prime membership by $20. Despite customer protestations, I am willing to bet that Amazon comes out way ahead on this move.

Another sign of Amazon’s seriousness toward pursuing profitability is its growing investment in private brands. Amazon already has more than 70 proprietary brands, and more are sure to follow. Done right, increasing the mix of its own brands can further drive market share gains by offering strong additional value to its customers and drive gross margins higher. Expect to hear more about the significant contributions these new brands are making within the next few quarters.

When it comes to buying versus shopping, Amazon holds more and more of the cards. More than 50% of all online product searches start at Amazon. Amazon is fast closing in on owning nearly 50% of the U.S. e-commerce market and is racking up significant share in many global markets. Prime membership tends to lock consumers into a virtuous shopping cycle where, at the margin, Amazon becomes the default choice for a growing basket of stuff. As Amazon gets deeper into physical stores (organically or through another major acquisition), even the “shopping” side starts to come more seriously into view—much of which should actually help expand margins. And personally I think Amazon has yet to take anywhere close to full advantage of its powerful customer data and insight assets.

Given the complexity of its operations—and the overlapping cycle of major investments in the next wave of growth—it’s often hard to discern the underlying dynamics of Amazon’s retail operations in any given quarter. Yet a few things seem clear.

First, Amazon likely never gets to decent operating margins without addressing the supply chain cost issue. Second, private brands will soon become a more important part of the story. Third, in the not too distant future, a more aggressive brick-and-mortar strategy is likely needed to continue to drive outsized growth. Lastly, Amazon still has a lot of levers to pull to leverage its data and take advantage of its growing customer loyalty. For the most part, improved profitability can likely come at a time and date of Amazon’s own choosing.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

On May 17 I will be keynoting Kibo’s 2018 Summit in Nashville, followed the next week by Retail at Google 2018 in Dublin.

Innovation · Retail · Winning on Experience

Macy’s acquires Story: Game changer or much ado about nothing?

Last week Macy’s announced it had acquired Story, a New York-based concept store, and appointed founder Rachel Shechtman to be its new “brand experience officer.” And, for the most part, enthusiastic gushing ensued. Let’s simmer down, people.

As I regularly write and speak on retailers’ need to innovate and embrace a culture of experimentation, I would be a complete hypocrite if I failed to applaud Macy’s (and newish CEO Jeff Gennette’s) willingness to take bold steps. Yet before we jump on the silver-bullet train we might wish to consider a few important points.

Is Story Successful Beyond Generating PR?

There is no question that Story is cool and innovative. There is no question that Story has punched way above its weight when it comes to generating industry and media attention. And the notion of “store as media” is an intriguing one that is appropriately starting to change the way brands must think about their brick & mortar experience.

But lest anyone forget, Story launched in 2011 and has never expanded to another city, much less another location in the New York area. It’s pretty difficult to make the argument that Story has the potential to “reinvent retail” on any significant scale when after more than six years the number of customers it has validated its impact upon is teeny tiny. Every other truly interesting “disruptive” concept I can think of that launched around the same time (or even later) has attracted significant investment capital and is well into their expansion plans. So, to be blunt, there is far more evidence to suggest that Story is a way cool Manhattan phenomenon than there is to suggest it has any real ability to be relevant to Macy’s customers—and ultimately material to Macy’s strategy.

Do You Know How Much Macy’s Paid? 

No, I didn’t think so. So how can you say it’s a genius deal? I happen to own a pretty nice car. But if you were willing to pay me $100,000 for it you would be the opposite of a genius. Perhaps Macy’s paid less than it would cost to hire Shechtman as a consultant for a couple of years, in which case that sounds like a bargain. Maybe it paid millions for something it could have done itself years ago, in which case that sounds more dumb and desperate. Maybe we should say “who cares?” as regardless it’s probably chump change to a huge company like Macy’s. In any event, we just don’t know. So please hold your applause.

Macy’s Problems Run Deep

Macy’s has two huge and fundamental problems to address. First, it sits in a sector that has been in decades-long secular decline—and there is no reason to think that will change anytime soon. In fact, as Amazon and the off-price sector continues to expand aggressively in Macy’s core categories, it could easily get worse. Second, while Macy’s does a bit better than most of its department store brethren, it is still part of the epidemic of boring, struggling to carve out a sustainably relevant and remarkable position. It has a lot of expensive, risky and time-consuming work to do on both the customer-facing experiential parts of their business and their technological infrastructure. This all comes at a time when the company’s profits have stalled. That’s a very tall order and no one strategic initiative is likely to make a dent.

Does This Deal Fundamentally Change The Macy’s Story?

While Walmart paid silly amounts of money for Jet.com, Bonobos, et al., it now seems clear that the injection of “digitally native” senior talent has helped take the moribund retailer to an important new level. It also earned them some street cred. So acquisitions like Story can certainly contribute to an enterprise well beyond their straight discounted cash flows.

While some have referenced Macy’s earlier deal to buy Bluemercury as an analog, my guess is that if Story is to make a real difference it will be more similar to Nordstrom’s acquisition of Jeffrey over a decade ago. As that played out, it was founder Jeffrey Kalinsky’s impact on Nordstrom’s overall fashion strategy that was the source of value rather than the expansion of his eponymous stores.

The key in this situation will be whether Macy’s gives Shechtman the latitude to impact the trajectory of Macy’s brand to any material degree or whether the culture will eat her up and spit her out. And even if she gets that latitude, it is no easy task for even the most talented and experienced executive to make a big difference within an insular culture. There are far more examples of experiments that have gone awry than have worked out. We will have a far better idea about this critical dimension a year from now. Regardless, it won’t be easy.

The Opposite Is Risky

To be sure, retailers like Macy’s got into trouble because they mostly watched the last 20 years happen to them. Consciously or not, they acted as if deciding to embrace innovation was risky when, as it turns out, their reluctance to take chances was the riskiest thing they (and so many others) could have possibly done. The simple fact is, as Seth Godin reminds us, “if failure is not an option than neither is success.” The key is not to avoid failure, it’s to fail better.

Macy’s, like all those risking “death in the middle,” are desperately in need of a transformation. And that unequivocally means placing multiple bets in the hope of creating a vastly different future. Viewed from this lens, the acquisition of Story—and giving Shechtman a chance to impact the Macy’s culture and brand—is likely a pretty decent bet. As it’s highly unlikely to materially change Macy’s overall fortunes all by itself, it needs to be the first of many such wagers.

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A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

On May 17 I will be keynoting Kibo’s 2018 Summit in Nashville, followed the next week by Retail at Google 2018 in Dublin.

A really bad time to be boring · Being Remarkable · Retail

Choosing the race to the bottom

It turns out that most retailers that find themselves at–or edging ever closer to–the precipice have much more of a revenue problem than having expenses that are fundamentally too high. And yet so many relentlessly focus on cutting costs, often leading to a further reduction in customer service.

It turns out that when the major lever a company has to drive the top line is deep discounting, they mostly end up attracting the promiscuous shopper while simultaneously lowering the margin on the customers who once were willing to pay a higher price. Over the long-term, that math never works.

And while it may be true that retailers can often do the same amount of business with a smaller footprint, it turns out that many of brands that are closing outlets in droves don’t actually have too many stores. Instead they have a value proposition that isn’t sufficiently customer relevant for the stores they have. Shuttering locations en masse may seem like the wise move to improve profits, yet it is typically the first sign of a downward spiral.

By now it should be obvious that trying to stake out a winning position by being a slightly better version of boring is untenable. The notion of cost cutting your way to prosperity is a fool’s errand.

Once we fully accept that selling average products to average people no longer works and that to make meaningful progress we must zero in on solving the right problem, we realize that for most of us the choice is clear–or should be.

We can choose to treat different customers differently, create intensely relevant and remarkable experiences and tell a story that deserves to be told time and time again.

Or, we can choose to join the race to the bottom.

Just remember, as Seth reminds us, “the problem with the race to the bottom is you might win.”

the-problem-with-the-race-to-the-bottom-is-that-you-might-win-quote-1

Customer Experience · Reimagining Retail · Retail

Retail’s new fork in the road: Understanding ‘buying’ vs. ‘shopping’

As I pointed out in my last piece, it is all too easy to be misled by high-level statistics and narratives that paint an incomplete picture of the retail landscape. Similarly, many fail to appreciate the underlying dynamics that (increasingly) separate industry winners from the losers and that which will ultimately determine when online shopping starts to mature. Much of this, I believe, can be understood by focusing on the difference between “buying” and “shopping.”

I’m hardly the first to make this distinction. Seth Godin got me thinking about this with his 2015 post. Since then it has become more and more clear to me that delving into the differences is extremely useful in ascertaining what is next for the retail industry.

Understanding ‘Buying’

Buying is mostly transactional. More mission, than journey. More search, than discovery. Most times buying tilts toward being need-driven rather than motivated by want. At heart of buying is efficiency. When we are in buying mode we care primarily about speed, convenience and a broad, yet easy to navigate, assortment. Buying tends to be highly-value driven. When transacting digitally it must be easy to compare prices. When buying in brick & mortar stores, customers come to learn which brands consistently deliver the best value and often start their process with these favorite stores.

With this lens, it should be easy to see that e-commerce is optimized for buying. The categories that do the best online are those where there is a strong, though not necessarily exclusive, buying dynamic. Unsurprisingly, this is where Amazon has the greatest market share and growth. When it comes to being remarkable in the realm of buying, much of it is about eliminating friction in the path to efficiency, be that on price, assortment and/or convenience.

Understanding ‘Shopping’

Shopping is far more experiential. When shopping many customers fundamentally enjoy the process of exploring and discovering, whether online or in a store. Shopping can be highly social. Shopping takes more time, but the value is there in finding just the right item, the right outfit or solving a more complicated problem–like furnishing a room or completing a home improvement project. When shopping, typically the risk of making a mistake is greater, so the ability to get sales help, shop with friends, try something on, touch and feel the product, and so on, is paramount.

While a strong digital presence can greatly facilitate the shopping process, the share of online shopping is dramatically lower than online buying. Categories with strong shopping characteristics (higher-end home furnishings, fashion apparel, non-commodity grocery items like produce and meat, etc.) have very low e-commerce shares.

Apocalypse No

There really is no retail apocalypse, but certain sectors of retail are clearly being radically transformed. Much of this can be best understood by understanding the difference between buying and shopping. By far the greatest disruption is occurring where buying is being reinvented, online and offline. The first wave of massive share shift occurred in the buying of entertainment when music, books and games could be digitally downloaded. This wave was, in fact, apocalyptic to the likes of Babbage’s, Barnes & Noble, Blockbuster and Borders–and that’s just the “Bs.”

More recently, platform businesses like Alibaba and Amazon have made the buying process far more efficient in many categories, leading to major market share gains and the demise (or teetering on the brink) of many brands that could not keep pace. But let’s be clear: Amazon is not “the everything store.” It is, however, quickly becoming the anything-you-want-to-“buy” store. Absent a far greater brick & mortar presence, Amazon will continue to struggle in its quest to dominate shopping.

Innovation and growth in “buying” has occurred outside of the purely digital world. Brands such as Aldi, Lidl, Dollar General, Ross, TJX and others have re-worked and expanded their business model by delivering ever greater “buying” value. If there is a retail apocalypse, someone needs to tell these brands. They will collectively add thousands of new stores this year alone.

The same is true in the “shopping” world. Sephora, Ulta, Apple and many others that continue to offer a remarkable shopping experience are growing both online and offline. Moreover, many high profile pure-play e-commerce players have basically started to run out of customers that would approach their brands in “buying” mode and thus they needed to go seek out “shoppers” with brick & mortar locations In fact, several once stated that they would never open stores. This is because they didn’t understand how the buying vs. shopping dynamic would inevitably play out over time. It now turns out that Warby Parker, Peloton and Bonobos are seeing the majority of their incremental growth come from their physical locations.

Stuck In the Middle With You

It’s increasingly untenable to attempt to stake out a middle ground between buying and shopping. The middle is collapsing. Trying to be sort of good at serving the customer who is firmly in buying mode is like being sort of pregnant. Being boring and unremarkable for customers in shopping mode is equally foolhardy.

The Fork In The Road

Certainly not every brand or every category has a clear cut, all or nothing, buying vs. shopping pattern. But it’s critically important to understand how this plays out for each and every retailer. While the ridiculous amount of debt Toys ‘R’ Us amassed was the proximate cause of their downfall, a strategic and financial crisis was inevitable as they wrong-headedly decided to be more about buying than shopping. Many struggling brands are similarly confused. This will not end well.

The fact is retailers must choose a clear path. If a retailer wishes to grab share (or insulate themselves) from the Amazon buying tsunami than it is pretty clear what that implies. Good luck and Godspeed.

If a retailer wishes to reimagine their business model to become a more remarkable shopping experience than that is an entirely different thing.

Choose wisely. Pick a lane. Step on the gas.

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A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

On May 2 I will be keynoting the Retail Innovation Conference in NYC, followed by Kibo’s 2018 Summit in Nashville and Retail at Google 2018 in Dublin.

e-commerce · Innovation · Retail

E-Commerce May Be ‘Only’ 10% Of Retail, But That Doesn’t Tell The Whole Story

It seems as if those who spend a lot of time worrying about the future of retail have fallen into one of two camps. There are the “retail apocalypse” proselytizers who would have us believe that virtually all shopping will eventually be done online, that most brick-and-mortar stores are doomed and that anyone who says otherwise is a dinosaur. At the other end of the spectrum are the disruption deniers who acknowledge that the retail climate is indeed changing but who take comfort in the fact that physical retail is still growing and, more notably, that e-commerce represents “only” about 10% of all retail.

They are both more wrong than they are right, and neither provides a point of view that is useful or actionable to brands or investors seeking to make critical decisions.

Let’s be clear. Physical retail is far from dead. There is no “retail apocalypse.” E-commerce is not eating the world. Every mall is not closing. And many of the brands we all know and love are likely to be around for a long time.

The facts are clear. In most major markets, physical retail continues to grow, albeit at a far slower rate than online shopping. Lots of stores continue to be opened, including by quite a few brands that are hardly new or “digital-first” (think Dollar General or Aldi). And it is true that physical stores account for roughly 90% of all retail sales (at least in North America). Five years from now, by most estimates, that number is still likely to be well over 80%.

But in most cases, taking any solace from the “e-commerce is only 10% of all retail” narrative is — and, well, there is simply no nice way to say this — just plain dumb.

First of all, that percentage is an industry-wide average, an amalgamation of many different categories. The percentage of e-commerce sales varies markedly by product segment, from around 2% for grocery to more than 20% for apparel to the overwhelming majority of sales in categories where products can be digitally delivered, like music, books and games. So perhaps folks in the supermarket business might justly not be completely freaked out by the growth and relative market share of e-commerce today, but I doubt you’d get the same reception from the executives at Borders and Blockbuster who failed to see the wave of digital disruption a decade ago and were given the gift of “spending more time with their families.”

Think of it this way: If you live in the U.S. or China or any nation with greatly varying climates, you wouldn’t decide what clothing to wear based upon the average temperature in the country. So why would one even think about driving the urgency and direction of their company’s corporate strategy based upon broad industry averages?

The other big problem with the “only 10%” argument is that it ignores the marginal economic impact of how a loss (or transfer) of physical-store sales to digital channels affects financial returns under specific retailer circumstances. A brand that has done a good job of “harmonizing” the customer experience across physical and digital channels might have kept most of the potential shift away from physical to digital within their corporate umbrella. Neiman Marcus and Nordstrom (as just two examples) may have struggled to grow comparable stores sales across the last several years, but their e-commerce business has been strong and now accounts for over 25% of total revenues. So clearly it can make a big difference, regardless of the category average for e-commerce, whether a brand captures much of the shift versus very little of it — as many other legacy retailers have failed to do.

Unfortunately, if one works in a business where margins are already below average and there are large fixed costs of operating stores and the marginal economics of online shopping aren’t good (likely owing to lower average order values and/or high rates of products returns) and the brand is not capturing its fair share of the shift away from physical stores to e-commerce, then relatively small revenue loss to online shopping can severely worsen overall economics. The moderate store department sector is a good example of this phenomenon and what is increasingly looking like a downward spiral.

Regardless of where a given brand falls within the digital category share numbers, the potential de-leveraging of its physical-store fixed costs and whether it faces what I call the “omni-channel migration dilemma” mandate a hard look at particular situations and dynamics. Relying on averages seldom works under any circumstances. An individual retailer’s mileage will, without question, vary.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

My next speaking gig is in Madrid on Tuesday at the World Retail Congress.  On May 2 I will be keynoting the Retail Innovation Conference in NYC.

Innovation · Reimagining Retail · Retail

ShopTalk 2018: Lessons in hope, reality and denial

What struck me the most thematically — aside from how much better ShopTalk has become than the NRF’s “Big Show” — was that the talks, panels and hallway discussions tended to fall into one of three buckets.

Hope

Despite the often relentlessly negative retail narrative in the mainstream media, there was a hopeful tone. As everyone should realize by now, the future of retail will not be evenly distributed — yet at the conference there was solid optimism. I attribute some of this to (generally) improving retail trends. I think there was also a sense that some of the more gut-wrenching changes — particularly mass store closings and major bankruptcies — were starting to ebb. Through direct conversations, as well as social media response, I also found quite a lot of alignment (or was it relief?) on my “Physical Retail Is Not Dead. Boring Retail Is” post, which was published on Day 2 of the show (and I referenced at the outset of the panel I moderated).

Another key driver of the emerging hopefulness was the traction some heretofore pie-in-the-sky technologies were beginning to exhibit. Numerous presenters, panelists and exhibitors showcased newly far more pragmatic applications of voice-activated commerce, artificial intelligence/machine learning and augmented or virtual reality. Personalization now finally seems ready for its closeup. Ultimately the devil is in the details — and a given retailer’s mileage will certainly vary — but there was plenty of meat to chew on for those committed to transforming the customer journey and being willing to embrace a culture of experimentation. (Pro top: That should be every retailer).

Reality

In multiple sessions greater light was shone on some undeniable realities. Whether one sees these as inconvenient truths, blinding flashes of the obvious or somewhere in between, several important things were hard to escape. Chief among them were:

  • The digital-first customer journey. In the vast majority of cases, regardless of where the ultimate transaction is made, most customer journeys start in a digital channel–and more and more, that means on a mobile device.
  • The customer is the channel. All the talk about digital channels versus physical stores is mostly a distinction without a difference. It’s all just commerce and silos belong on farms.
  • The middle is collapsing. Just prior to ShopTalk Deloitte released an excellent study on the bifurcation of retail, which they showcased in a session. The study not only dispels the myth of the retail apocalypse but delves into the causes and conditions of the growth at the tail ends of the market and the reason why I have long suggested that it’s becoming death in the middle. The reality is retailers have to pick a lane and strive to become remarkable on either the price/value/convenience end of the spectrum or strive to make the shopping experience more intensely relevant and remarkable.

Denial

Sprinkled among the upbeat mood and growing acceptance of the new world order were moments of shocking denial or abject cluelessness. Most disturbing (or just plain sad) was when presenters would say something as if it were deep insight or some critically important new piece of strategic information. Instead they by and large only confirmed the degree to which they had been asleep at the wheel for the past decade. I won’t name names, but at least one retailer that presented will likely need a miracle on 34th Street to go from boring to truly remarkable.

Yes, brands are still important. Yes, multi-channel shoppers spend more than single channel shoppers. Yes, mobile is an important part of the customer journey. Yes, your e-commerce sales will go up in the trade area where you decide to open a store (newsflash: brands that started in catalog sales have known this for decades). Yes, when you close stores your e-commerce sales are likely to go down. All of this and more has been known for years to those who pay attention, do the work and are willing to act on their insight.

Stepping back, in total, there was a lot of great information and insight to be gleaned. I spoke with dozens of folks who had dozens of substantive follow-up actions that resulted from content sessions, one-on-one meeting or what started as purely social interactions. The key to all of this, of course, is to go from information to insight to action.

For legacy brands that are struggling — or newer brands that need to stay relevant over the long term — I remind them of a Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is today.”

 

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

My next speaking gig is in Madrid at the World Retail Congress.  Check out the speaking tab on this site for more on my keynote speaking and workshops.

Retail

BREAKING NEWS: Trump To Replace AG Sessions With Pomeranian

Early this morning the Trump administration announced that long embattled Attorney General Jefferson Beauregard Sessions III was out and a pomeranian called Mr. Big Stuff was inAccording to sources the name Mr. Big Stuff is meant to be ironic given the breed’s diminutive stature.

While news of Sessions’ ouster was not unexpected, the decision to nominate a candidate with neither government experience nor a legal degree was deemed surprising by many Washington insiders. Several other Justice Department officials who did not wish to be quoted also raised concerns that Trump’s nominee was, in fact, a dog.

Rumors began swirling on Friday that Sessions day’ of reckoning might be coming and several news outlets reported that the President was likely to name Anastasia Pomeranian, the Yale Law School graduate and current justice of the 9th Circuit US Court Of Appeals. CNN’s Jeffery Toobin, who first broke the story, said “it’s not clear whether those reports were wrong or somebody just heard “Pomeranian” and drew what in every friggin’ other administration would have been the logical conclusion.” Mr. Toobin could not be reached for follow-up comment as he is reportedly taking a month off to “re-evaluate every thing he has ever thought, felt, considered or believed.”

The New York Times reported that President Trump apparently began considering Mr. Big Stuff last weekend when he observed the dog with its owners Sheldon and Marian Adelson strolling through the main dining room of his Mar-a-Lago club.

According to Times’ reporter Maggie Haberman’s sources Trump told friends “So I’m sitting at the club having this most beautiful piece of chocolate cake with my wife Ivanka (Editor’s note: Trump’s wife is named Melania) and this cute little dog comes in with the most incredible smile and just this tremendous fur and she’s just beautifully groomed and, to be honest, I can’t take my eyes off of her (Editor’s note: Mr. Big Stuff is male). And you know I start thinking the thing with Jeff is he’s always just so surly and nobody likes to talk about this, but he’s losing his hair. So I say to myself why not bring in some fresh new ideas and a great coat and just lighten things up a bit. When I heard Pomeranians were from Eastern Europe I thought I had to have her (Editor’s note: Pomeranians are from Central Europe).”

Reached for comment White House Spokesperson Sarah Huckabee Sanders denied the conversation took place but said that obviously by “having to have her” the President meant in his cabinet. She added that Mr. Big Stuff has gone through all the vetting consistent with the same policy that President Obama used to promote candidates from other species to his administration.

The decision, which according to reports was aggressively supported by White House Chief of Staff John Kelly, became final when they learned that Pomeranians are good with children and known to become aggressive when other dogs challenge them.

Adding mystery to the surprise announcement is that little is known about Mr. Big Stuff’s judicial leanings. In an interview published last spring in Pom World, Ms. Adelson shared that Mr. Big Stuff is strongly anti-squirrel and gets very fussy when “that bitch next door’s cat comes over the fence.” Those reports could not be independently confirmed. While being careful to note that they did not know Mr. Big Stuff personally, many judicial scholars expressed concern that dogs are not generally known for their level of scholarship and legal discernment. Famed defense attorney Alan Dershowitz opined “I think it’s fair to say that Mr. Big Stuff will be on a pretty steep learning curve, not to mention having to deal with all the issues surrounding the Mueller investigation.”

Reaction from Capitol Hill was swift and generally negative. Former Pennsylvania Senator Rick Santorum weighed in adding “see this is just what I’ve been talking about for years. We keep allowing more and more freedom and before you know it a whole other species becomes a high government official.” Senator John McCain, long a vocal critic of the Administration, upon learning the news simply walked away, shaking his head and muttering what several outlets reported to be “just shoot me.”

This latest controversial White House move comes on the heels of Trump’s picking a new Secretary for the Veteran Affairs Administration (the US’s 2nd largest department) with little management experience and the revelation that HUD Secretary Ben Carson was replaced with a robot late last year.

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A really bad time to be boring · Reimagining Retail · Retail

Physical retail is not dead. Boring retail is.

It may make for intriguing headlines, but physical retail is clearly not dead. Far from it, in fact. But, to be sure, boring, undifferentiated, irrelevant and unremarkable stores are most definitely dead, dying or moving perilously close to the edge of the precipice.

While retail is going through vast disruption causing many stores to close — and quite a few malls to undergo radical transformation or bulldozing — the reality is that, at least in the U.S., shopping in physical stores continues to grow, albeit at a far slower pace than online. An inconvenient truth to those pushing the “retail apocalypse” narrative, is that physical store openings actually grew by more than 50% year over year. Much of this is driven by the hyper-growth of dollar stores and the off-price channel, but there is also significant growth on the part of decidedly more upscale specialty stores and the move of digitally-native brands like Warby Parker and Bonobos into brick and mortar.

People also seem to forget that, according to most estimates, about 91% of all retail sales last year were still transacted in a brick-and-mortar location. And despite the anticipated continued rapid growth of online shopping, more than 80% of all retail sales will likely still be done in actual physical stores in the year 2025. Different? Absolutely. Dead? Hardly.

I have written and spoken about the bifurcation of retailand the collapse of the middle for years. While I was confident in my analysis, I had concluded much of this through intuition and connecting the dots from admittedly limited data points. Now, a brilliant new study by Deloitte entitled “The Great Retail Bifurcation” brings far greater data and rigor to help explain this growing phenomenon. Their analysis clearly shows that demographic factors — particularly the hammering that low-income people take while the rich get richer — help explain the rather divergent outcomes we see playing out in the retail industry today.

In particular, wage stagnation and the rising cost of “essentials” is driving lower income Americans to seek out lower cost, value-driven options. Rising fortunes for top earners, most notably ever greater disposable income, creates spending power for more expensive retail at the other end of the continuum. Deloitte’s data clearly shows the resulting strong bifurcation effect: Revenue, earnings and store growth at both ends of the spectrum and stagnation (or absolute decline) in the vast undifferentiated and boring middle.

Notably, if we isolate what’s going on with retailers focused on delivering convenience, operational efficiency and remarkably value-priced merchandise, along with those retailers that differentiate themselves on unique product and more remarkable experiential shopping (including great customer service, vibrant stores and digital channels that are well harmonized with their stores), you would conclude not only that physical retail isn’t dead, you could well argue it is quite healthy.

Conversely, the stores that are swimming in a sea of sameness — mediocre service, over-distributed and uninspiring merchandise, one-size-fits-all marketing, look-alike sales promotions and relentlessly dull store environments — are getting crushed. A close look at their performance as a group reveals lackluster or dismal financial performance and shrinking store fleets. For these retailers, by and large, physical retail is indeed dead or dying. But so are their overall brands.

It’s been clear for some time that the future of retail will not be evenly distributed. Those that have looked closely know that the retail apocalypse narrative is nonsense. Yet, depending on where brands sit on the spectrum, the impact of digital disruption and the age of Amazon is affecting them quite differently. For some, at least for now, it’s much ado about nothing. For others, it should be sheer, full-on panic.

These forces, along with the underlying macroeconomic factors that Deloitte illuminates in their report, bring far greater clarity to what many have been missing, leaving the savvy retail executive to conclude a few key things:

  1. Physical retail is not dead, but it’s very different
  2. The future of retail will not be evenly distributed
  3. The market is likely to continue bifurcating and, increasingly, it’s death in the middle
  4. It’s a really bad time to be boring
  5. Struggling retailers need to pick a lane
  6. If you think you are going to out-Amazon Amazon you are probably wrong
  7. Most likely you are going to have to have to choose remarkable
  8. You have to get started and you had better hurry
  9. What better time than now?

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

My next speaking gig is in Madrid at the World Retail Congress.  Check out the speaking tab on this site for more on my keynote speaking and workshops.