A really bad time to be boring · Death in the middle · Retail

Sears lives to die another day

Against the odds—and over the objections of most creditors—Eddie Lampert has “saved” Sears, with a federal bankruptcy court judge approving the sale of the once-storied retailer to the billionaire hedge fund king.

At one level, we should admire the resilience of the former Sears CEO (and its principal shareholder, though ESL Holdings). Part Energizer bunny, part Michael Myers from the Halloween movies, part gag birthday cake candles, he just won’t die. At another level, it’s hard to imagine a bigger waste of time. Moreover, the idea that he is motivated to keep the company going to save some 45,000 jobs is laughable and undeniably cruel.

For more than a decade, we have witnessed the brand shrink and shrink. Under Lampert’s leadership, the majority of Sears and Kmart locations have been shuttered. Key brand assets have been sold off to keep the lights on. Comparable store sales have been down virtually every quarter since 2004, and e-commerce sales have consistently lagged the industry. Nothing in the latest Hail Mary move reverses a strong downward trajectory. In fact, the situation keeps going from bad to worse, and the current fragility presents growing challenges, as fellow Forbes.com contributor Warren Shoulberg highlights.

As I have touched on before, Sears has been in trouble for decades, and it’s highly unlikely that anyone could have restored the brand to its former glory, much less maintain it as a meaningfully profitable national retailer. While that may be an interesting thought piece or business school case study, the reality today is that Sears simply has no reason to exist in its current manifestation. Sears no longer offers anything that is remarkable to customers—and no strategic plan has been proffered to alter that. While there may be a few diehard fans (heh, heh) left, absent any nostalgic feelings, as a practical matter, no one will miss Sears when it is gone. There simply are plenty of better options to buy everything that Sears sells.

A Sears store in Hackensack, N.J. (AP Photo/Seth Wenig, File)

Despite being a former Sears executive, I now only wish the insanity would stop. There is no plausible scenario in which Sears does not keep shrinking into oblivion. There are few assets left to fund operating losses. The company will struggle to get creditors to ship it product. Its management team is in tatters. It has no clear target customer groups or compelling value proposition. It has little cash to invest in the areas that desperately need improvement—most notably its remaining stores. And the competition only continues to grow stronger and have greater scale to apply against any resurgence.

So the world’s slowest liquidation sale has entered yet another chapter. I will leave it to others to debate whether this particular move is merely a “scheme to rob Sears and its creditors of assets” or whether it is a good-faith effort to keep Sears as a going concern. Regardless, it is good news for the many thousands of Sears associates who get to keep their jobs for a bit longer. Sadly, though, for most of them, it only delays the inevitable.

As the former Sears CEO (and my former boss) Alan Lacy recently said, “We know how this movie ends; I’m just not sure how many more minutes are left.” Dead brand walking.

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 February 25th I will be doing the opening keynote at New Retail ’19 in Melbourne, Australia, followed the next week by ShopTalk in Las Vegas where I will be moderating an expert panel and participating in other events.

Reimagining Retail · Retail

Why are some retailers only now realizing they have way too many stores?

Last month, Chico’s announced it plans to close 250 stores.

Recently, H&M decided to shutter 160 locations.

Last week, Charlotte Russe said it will close nearly 100.

Of course, this is hardly a new phenomenon. In recent years, dozens of chains have concluded that a meaningful percentage of their stores are suddenly superfluous. I’m not talking about the selective pruning of the real estate portfolio that retailers have been doing for ages as leases come up for renewal and/or evolving customer behavior warrants walking away from a handful of locations (or relocating them). What Nordstrom, Williams-Sonoma and others have done recently is far from alarming. What Sears and many others are engaged in typically speaks to abject leadership failure.

Absent the recent injection of new management, if a retailer’s leadership suddenly decides that 10% or more of its stores are no longer needed, we can be fairly certain of one thing: They have been asleep at the wheel. And why more boards and C-level executives are not taken to task (i.e. fired) for this is a complete mystery to me. Think about the following as you ponder brands that have taken an ax to their store fleets:

Was government legislation passed that suddenly made so many stores untenable?

Did a competitor emerge out of nowhere to crush the fundamentals of their business model?

What sea change in consumer behavior obviated the need for a strong physical presence in dozens of once-viable trade areas?

Far too often the harsh reality is that the underlying reason is management’s lack of awareness, an unwillingness to accept the new reality and a failure to act before a crisis emerges.

The majority of time the bullet that killed all these locations was fired years ago. The rapid growth in e-commerce, the impact of digital on driving store traffic, the blurring of shopping channels, the collapse of the middle, the bifurcation of shopping vs. buying, etc. have all been obvious for many years. So if management is only taking aggressive action now, we can be fairly certain that that they have not been paying enough attention for some time and were too cowardly to act. Perhaps Blockbuster or Borders can be given a bit of a pass for not seeing the rapid and disruptive impact of downloading streaming entertainment services on their core business models. But if you are in the apparel business and aren’t on top of what has been happening the last decade, there is simply no excuse. And boards and investors need to stop tolerating this nonsense.

In fact, there are plenty of examples of brick-and-mortar retailers that are successfully navigating the shift of power to the consumer and the impact of digital disruption. I wrote about them last week. These brands are seeing a renaissance because they realized they had a brand relevance problem, not a too many stores problem—and acted accordingly. They are winning because they saw their stores as assets, not liabilities. The notion that retailers can close massive number of outlets to create more profitable relevance is almost always a fool’s errand. I keep asking for examples of retailers that have done so successfully and the din of the crickets is growing distracting.

Time will tell if these brands will be able to shrink to prosperity. For everyone else it’s time for a gut check. It’s time to do the hard, uncomfortable work of going from boring to remarkable. It’s time to realize that, yes, the best time to plant a tree was 20 years ago and 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.  

On February 25th I will be doing the opening keynote at Retail ’19 in Melbourne, Australia, followed the next week by ShopTalk in Las Vegas where I will be moderating an expert panel and participating in other events.

Embrace the blur · Harmonized · Retail

The stores strike back

Amidst all the retail apocalypse nonsense it turns out that physical retail isn’t dead after all.  Last year some 3,000 new stores were opened and physical retail continued to have positive growth in most major global markets. One of my 14 predictions for retail in 2019 is the notion that, despite the presumed death of physical retail, quite a few major brands are seeing a renaissance of sorts. In fact, stores are striking back against being made obsolete by online shopping in many different and important ways.

Amidst all the retail apocalypse nonsense it turns out that physical retail isn’t dead after all.  Last year some 3,000 new stores were opened and physical retail continued to have positive growth in most major global markets. One of my 14 predictions for retail in 2019 is the notion that, despite the presumed death of physical retail, quite a few major brands are seeing a renaissance of sorts. In fact, stores are striking back against being made obsolete by online shopping in many different and important ways.

A couple of years ago legacy retailers like Walmart, Best Buy, Target and Home Depot were often seen as laggards, soon to be made progressively more irrelevant by Amazon and others. Yet it turns out, to paraphrase noted retail strategist Mark Twain, reports of their death were greatly exaggerated.

A couple of years ago, beyond Amazon’s disruptive impact, the future was often thought to be concentrated in the large number of venture capital funded “digitally-native vertical brands” that could scale to massive value creation by avoiding pesky and asset intensive stores.  Yet, in a rather ironic twist, a large cohort of the once firmly “we’ll only grow online because physical retail is going the way of the dinosaurs” upstarts will collectively open more than 800 brick-and-mortar locations this year. Most are now experiencing most of their growth from good old fashioned stores.

A couple of years ago, many analysts and “futurists” saw e-commerce getting to 50% share within a decade and questioned why anyone would invest in physical stores. But facts are stubborn things, and it’s clear we aren’t remotely on a glide-path to online getting to even 30%. Moreover, rather traditional retailers as diverse at TJX, Sephora, Ulta and Dollar General are openings dozens upon dozens of stores. We also have retailers like Tractor Supply and AtHome becoming large, growing and incredibly successful brands with an overwhelming focus on brick-and-mortar locations.

So how do we explain all this?

Not every customer is like you. You personally may love the ultra-convenience of e-commerce and hate going to stores. Good for you. But there is a reason 89% of all retail is still done in brick-and-mortar locations. Every retailer needs to respect the differences among consumers and their key purchasing drivers across different occasions. Repeat after me: treat different customers differently.

Brick and mortar trumps e-commerce in many respects. Shopping in physical stores is more emotional, social and connected. Shopping in physical stores allows customers to try stuff on, understand the real look of a given product and get a clearer sense of value. Shopping in physical stores offers immediate gratification. Shopping in physical stores makes it easier (usually) to put more complex solutions together, like a home project or assembling an outfit. It’s a digital-first world. Until it’s not.

E-commerce is often pretty unprofitable. It’s great that investors are willing to subsidize the poor profitability of many disruptive concepts, from Uber to WeWork to Amazon to Wayfair. It won’t last forever and many sophisticated companies are starting to lean into the lower cost acquisition and/or distribution costs of physical locations vs. direct-to-consumer. Accordingly their investment decisions and pricing are starting to reflect the underlying economic realities.

There is a big difference between buying and shopping. If you are on a largely search-based mission, item-focused and care mostly about price and convenience, e-commerce works really well.  Hence Amazon’s strong relative share in these “buying” occasions. You might even get all wild and crazy and use Alexa. But if you are more engaged in discovery, something more emotional and want a more holistic experience, then you are “shopping” and a physical store-centric (albeit digitally enabled) path is often your best bet.

Assets or liabilities? A brand that fundamentally sees their stores as liabilities typically seeks to optimize them–and a cycle of cost cutting and store closings begins, typically initiating a downward spiral.  If a brand see their stores as assets, they work on improving e-commerce and digital enablement capabilities and lean into making the stores more relevant. Contrast Sears strategy with Target’s. Sears disinvested in stores and will soon be gone. Target shifted many things about its store strategy and simultaneously upped its digital game, while plowing billions into store upgrades and omni-channel capabilities. So have Walmart, Home Depot and Best Buy. Nordstrom has continued its decade long strategy of doing so. It’s paying off.

It’s all one thing. Brands that are physical store dominant see their brick-and-mortar locations as the hub of a shopping ecosystem. They don’t get hung up on a phony battle between e-commerce and stores. The customer is the channel. Online drives stores and vice versa. Their mission is to leverage the best of each customer touchpoint, eliminate the friction, harmonize the experience and amplify the “wows.” Rinse and repeat.

Sure, there is plenty of doom and gloom in the retail industry. And the collapse of the boring middle is real–and not about to go away.

Yet there is plenty of hope as well for those that do the work, reimagine the opportunities and are willing to act decisively.

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 February 25th I will be doing the opening keynote at Retail ’19 in Melbourne, Australia, followed the next week by ShopTalk in Las Vegas where I will be moderating an expert panel and participating in other events.


Retailers’ pointless pursuit of the promiscuous shopper

I’m not sure who said it first, but it’s certainly true that great brands don’t chase customers, they attract customers to them. But I think it goes deeper than that.

This week, as many retailers close their books for the fiscal year, those that remain stuck in the boring middle are very likely to experience weakening margins–or margins that remain materially below industry averages. And when some of the faster growing public “digitally-native” brands share their quarterly numbers, there is a good chance that their margins will be poor as well. The relentless, expensive and mostly futile pursuit of the promiscuous shopper deserves much of the blame.

By promiscuous shopper I don’t simply mean those folks that are value conscious or use technology to be sure they aren’t getting ripped off. Many people do that. What I’m referring to are those shoppers that have virtually zero propensity to remain loyal within a particular category and are constantly searching for the best deal. Clearly having too many of these customers in a retailer’s portfolio can make it impossible to grow enterprise value if they don’t spend at all without receiving a big fat discount. In some cases (as Peter Fader and Dan McCarthy’s work has illuminated) many of these customers may actually have negative marginal value. So the more a brand grows, the worse it gets. But enough about Wayfair.

Of course plenty of this is self-inflicted and hardly new. Over multiple decades the retail industry has done a great (and by “great” I mean “lousy”) job teaching customers to wait for a deal and that regular price is not only mostly meaningless but is often “the sucker price.” The long-suffering department store sector is perhaps the poster-child for this behavior, with constant promotions and the layering on of “friends & family” and private label credit card discounts. That doesn’t seem to be working out all that well. But we also have Bed, Bath & Beyond with their ubiquitous coupons, as well as plenty of other retailers offering a litany of buy 1, get 2 (or 3!) free promotions that obliterate any concept of regular price.

Despite a long-history of “promotional retail”, in recent years this chasing of the promiscuous shopper has gotten worse and now makes it imperative for retailers to get their acts together. Pricing information used to be relatively scarce (or hard to come by). Today, not so much. As the power has shifted to the customer it’s next to impossible for any retailer to get away with having uncompetitive pricing. More pernicious, though, is the heavy discounting on the part of venture capital funded “disruptive” brands. As these companies seek to maintain their growth trajectory and/or seek to be the last brand standing in a rapidly maturing segment (think flash-sales 5 years ago and subscription meal kits today), massive discounts are being thrown at new customers, many of whom will simply go back and forth from one largely interchangeable brand to the next. This will end badly.

So what’s the solution? First of all, if the underlying business model is unremarkable, a more sensible promotional strategy is necessary, but not sufficient. To be sure, JC Penney spends way too much time and energy chasing promiscuous shoppers. So does Macy’s. But their issues go beyond a lack of more sophisticated target marketing. There are always better ways to chase customers, but it’s the chasing that is the core issue.

Nevertheless, all brands need to understand both their marginal customer economics and lifetime value at a detailed level. They need to find more ways to treat different customers differently. In some cases that means stop pursuing customers that can never be profitable. But in most cases it will mean a much more finely honed and personalized set of customer-focused strategies informed by deep customer insight.

The fact is very few brands can ever “own” discount–and those retailers that try to compete with them are merely engaging in a race to the bottom. If your brand only gets love when you pay for it, aside from the not so nice metaphor, you might want to get to work on the underlying reasons.

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.  

I was honored and humbled to move up to #5 on Vend’s 2019 Top Retail Influencer List and to be recently named a Top Retail Tech Influencer to follow on Twitter.

Harmonized · Innovation · Remarkable Retail

NRF’s Big Show: Addressing the knowing-doing gap

Just about every year for the past 25 or so, I make the trek to New York to rub shoulders (quite literally) with nearly 40,000 of my closest friends (not literally) during the National Retail Federation’s “Big Show.” It’s always a great opportunity to connect with the industry’s movers and shakers, see the latest in retail technology, hear from established and up-and-coming brand leaders and put one’s claustrophobia to the test.

In past years I’ve written a synthesis of my key takeaways from the event. But this year I’d like to focus on just one theme, partially because there are many excellent summaries already published–like this one from the NRF, this post from fellow contributor Chris Walton or this one from Forrester’s Brendan Witcher. The more substantive reason, however, is to address what many of us may already know yet have a hard time admitting: armed with all this knowledge we will leave the Big Apple behind, go back to our jobs and precisely nothing of any import will change.

The sad and frustrating fact is that I have attended the Big Show (and many other retail events) long enough to hear many of the same things repeated over and over again only to return a year later aghast, realizing that so few brands have acted upon what is increasingly obvious, important and, all too often, dire.

Every year, for the better part of a decade, we have heard speakers talk about how the the channels are blurring, how we are moving to a mobile-first customer journey, how important it is to root out friction in the customer experience, how data must be leveraged to provide a more personalized experience and on and on. And every year my guess is many in the audience return to hear a re-packaged version of the same prognostications having taken little or no action in the intervening time.

As one small example, I sat in on presentation where the speaker shared the “insight” that customers who shop in more than one channel are “better” customers. Aside from confusing correlation with causality–and aside from having shared this type of analysis myself at two different retailers in 2003 and 2006 respectively–some version of this alleged wisdom nugget has been trotted out at many a conference for quite some time. So if this is new knowledge to anyone in the audience it merely proves that they haven’t been paying much attention. But in the absence of a time machine, the real questions we are left with are: so what? and now what?

Over 3 days, and now for multiple years running, we’re told “the customer is back” or that physical retail isn’t dead or that we shouldn’t worry because e-commerce is “only” 10% of all retail. While this may be true in the abstract, the one thing we know for sure is that no one brand experiences any of these trends in the aggregate or in the same way. For some retailers, the customers they’ve been chasing are never coming back, their stores are in fact dead or dying and they may be experiencing a much bigger migration to digital commerce with attendant devastating consequences. Your mileage WILL vary and these platitudes are neither very useful nor very comforting.

What we must do instead is to take this big picture knowledge and translate it into strategies that matter for our unique situation. And then we must take action: by launching innovative experiments, by refining what has potential and scaling it fast, by killing quickly what isn’t working. Rinse and repeat.

Showing up is a start, but merely sitting in the audience consuming information doesn’t count for much.

Taking amazing notes or writing pithy summaries can be helpful, but without doing anything with it it’s mostly a waste of energy.

And enthusiasm is great, but the cheerleaders never win the game.

If the knowledge doesn’t translate into useful and meaningful action a visit to NRF is merely a vacation. And a chilly and expensive one at that.

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.  

I was honored and humbled to move up to #5 on Vend’s 2019 Top Retail Influencer List and to be recently named a Top Retail Tech Influencer to follow on Twitter.


Out on a limb: 14 predictions for retail in 2019

Last year I started making annual retail predictions–some more provocative than others. For a first-timer I must say I think I did pretty well. Undaunted, I’m now back with my 2019 list of (mostly) bold predictions. Here goes…

  1. Apocalypse? No. Yes 2018 was yet another year of massive store closings and retail bankruptcies. And while I expect the pace to moderate this year we will still witness many hundreds of store closings and several major Chapter 11 filings. Yet it will become crystal clear to all but the most click-bait hungry that much of physical retail is pretty darn healthy and that the overall idea of a retail apocalypse is ridiculous . In fact, in addition to the more than 800 stores that digitally-native vertical brands (DNVB’s) will open, traditional retailers will open thousands of stores and brick & mortar overall sales will be positive.
  2. The collapse of the middle continues apace. Repeat after me:Physical retail isn’t dead. Boring retail is. Which is why we continue to see the vast majority of store closings and bankruptcies concentrated among those brands that remain stuck in a sea of sameness. In an era of digital disruption failure to be remarkable eventually leads to failure as a going concern– as Sears, ToysRUs and others learned all too well. Good enough no longer is. Retailers that fail to pick a lane and execute against the essential elements of remarkable retail are on their way to the retail graveyard.
  3. The stores strike back. It turns out that when retailers see their stores as assets to be leveraged rather than liabilities to be optimized–and recognize that the customer is the channel–the combination of strong digital capabilities and re-imagined brick & mortar is often pretty powerful. Walmart, Best Buy, Nordstrom and others accept that silos belong on farms and that by embracing the blur they can drive superior outcomes, even in the face of Amazon’s growing presence. Well harmonized customer journeys can often be superior to anything that online-only brands offer, particularly when the unique advantages of brick & mortar are done right.
  4. Isn’t ironic? For DNVB’s now it’s mostly about brick & mortar. Recentlymore folks started to understand that much of e-commerce is unprofitable and that scaling pure-plays is mostly impossible. In an ironic twist, many of the digitally-native brands that raised hundreds of millions on the premise that stores were unnecessary are now not only opening stores, they are starting to realize most of their growth from physical locations. In fact, without a robust brick & mortar strategy many would be in serious financial trouble and be awaiting a call from Walmart.
  5. Better is still not the same as good for Macy’s, et al. Macy’s, Kohl’s and Dillard’s comparable stores sales showed signs of life in 2018. And they may continue to do so in 2019. But let’s not confuse better with good. Macy’s is finally doing some interesting things and should be applauded for being more aggressive about innovation. Yet all three of these chains, to varying degrees, are gaining from the shuttering of competitors’ locations, a strong economy and the mess that is JC Penney (see below). These are largely unsustainable benefits. Without moving more strongly from me-too and mediocre to relevant and remarkable, trouble lies ahead.
  6. It’s do or die time for JC Penney. While in many ways JCP is the poster-child for being stuck in the boring middle–and was dealt a nearly fatal blow by the failed turnaround strategy of Ron Johnson–it still amazes me that they have not performed better, particularly as arch nemesis Sears rides off into the sunset. Lack of a coherent vision, a way under-developed e-commerce strategy, undifferentiated merchandise, look-a-like marketing and poor store execution need to be addressed in a big way STAT. While the maturity of Penney’s debt gives them some running room, without major forward momentum the story of Penney’s by the end of 2019 will be much the same as Sears today . Dead brand walking.
  7. An Amazon and Walmart showdown. Across the last 18 months or so Walmart realized it needed to dramatically up its digital and harmonized retail capabilities, which led to significant store, e-commerce and supply chain investments and a series of acquisitions (most notably of Jet.com). At the same time Amazon saw that in order to sustain its growth and improve profitability it needed to double down on its physical presence. While the two biggest retailers in the US have been intense competitors for years, this year they will find themselves in a rapidly escalating battle, particularly in grocery. Whether it turns out to be a race to the bottom remains to be seen.
  8. The emerging BOPIS crunch. It’s been clear for awhile that BOPIS (buy online, pick-up in-store) offers something many customers want, while also holding the promise of mitigating retailers’ growing costs of direct-to-customer fulfillment. It can also drive incremental store visits. By one estimate holiday BOPIS sales up 47%. and we are seeing a sharp uptick in retailers that are implementing this capability. The only problem is that many brands are not ready to handle this out-sized growth. In most cases doing BOPIS well puts pressure on processes and staffing while challenging the ability to dedicate convenient and adequate space. The complexities of BOPIS will wreak havoc with quite a few retailers this year.
  9. Stores as theaterMore and more it will seem like all the store’s a stage as brands create highly immersive and memorable experiences that can only be found in their brick & mortar locations . Some will be highly focused like Canada Goose’s “cold rooms.”  Others will introduce theatrical elements on a grander scale like Nike’s House of Innovation, The key will be to avoid gimmicky “lipstick on the pig” approaches and, instead, deliver something highly relevant, on brand, Instagram-worthy and remarkable.
  10. Micro-markets start to shine. Yes, many customers want everything, right now at the cheapest price. But the mass-ification of retail (be that via Amazon or big-box “category killers”) means the proliferation of a lot of average stuff for average people–and who wants to be average? The long-tail has plenty of advantages in making remarkable products available anytime, anywhere, anyway to just about anybody, but that is much more about search and discovery rather than delivering a memorable value proposition to highly targeted segments. Enter concepts like Phluid that focuses on gender non-conforming customers. Or Bottletop that delivers sustainable fashion. Or the Akola Project, the first 100% social impact jewelry brand. Or any of the dozens of new brands that innovate in a very particular way to pursue not the largest viable market but–at least initially–the smallest.
  11. It’s the end of the mall as we know it, and I feel fine. Plenty of malls are dead or dying. A lot are doing incredibly well. Mostly malls are evolving rapidly or getting entirely repurposed. Shift happens. When the dust settles (if it every truly does) there will be still be hundreds of malls that will be nicely profitable. But gone (and mostly demolished) will be many of the anchors that were key to the ascendency of regional malls decades ago. The specialty store mix will evolve, with more Allbirds, Warby Parkers and Caspers and fewer Gymborees, Gaps and J.Crews. Entertainment will continue to be dialed up and pilots of hybrid/pilot formats like PlatformBrandbox and Neighborhood Goods will get expanded.
  12. Wayfair crashes back to earth. The cracks in the pure-play model at scale become more evident as we get to see more public companies report concerning numbers (I’m looking at you StitchFix and Blue Apron). But, if you pardon my French, the cream of the crap is Wayfair. The difficulties of their underlying model were first exposed by the excellent work of Dan McCarthy and Peter Fader. Subsequent quarters reveal a disturbing pattern of escalating customer acquisition costs. Selling at a loss and trying to make it up on volume is a strategy that eventually hits a wall. This will be the year. But maybe Walmart or Amazon acquires them at a silly valuation. Never underestimate the greater fool theory.
  13. Voice shopping remains a yawn (for now). The sales of voice command devices are on a tear. According to a recent report from Amazon its sold over 100 million Alexa-powered devices so far. Alas voice shopping hasn’t gained a heck of a lot of traction, at least yet. The use cases remain a bit limited and concerns about privacy may reign supreme. But as US household penetration is still under 25% we have a ways to go before voice shopping truly disrupts the retail industry. But it will happen. Just not in 2019.
  14. Better metrics start to emerge, albeit too slowly. Nearly a year ago Brent Franson and I wrote a piece that argued that “The Reinvention Of Retail Demands New Metrics.” While I am aware of a few companies that are moving away from the obsession with comparable store sales and sales per square foot that don’t properly account for the effect of stores on digital channels and vice versa, there isn’t a lot of traction here. And given retail’s slow moving ways I doubt the industry will have an epiphany by year’s end. But it needs to happen. Now.

The only thing I know about this list is that several big things are certain to happen that I either missed or that no one could possibly predict. Either way, it’s always worth going out on a limb. After all, that’s where the fruit is.

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.  

Next week I’ll be keynoting the ICSC Nexus Conference. In February I’m headed down under.


Blake Nordstrom: Gone too soon, but his impact on retail will long be remembered

I met Blake Nordstrom, co-president of the namesake retailer, only one time, and it was way back in 2005. I was an executive at Neiman Marcus, and many of us on the senior leadership team were attending the grand opening of our new store at the Shops of La Cantera in San Antonio, Texas. About an hour or so after opening our doors and greeting customers, we decided to check out the new Nordstrom, which had also just opened that morning.

Strolling past the specialty shops that were a bridge to our more accessibly priced competitor, who should be coming toward us but the Brothers Nordstrom? It turned out they were on a similar mission. I honestly don’t remember much about what was said, but I remember the feeling: warmth, congeniality and mutual respect. As we parted, Burt Tansky, our CEO, said something along the lines of “that is one great family.”

More than a decade later, well into my new career as a consultant, speaker and writer, I was interviewed by the Seattle Times for a piece about Nordstrom. My comments, both on background and ultimately in the story, highlighted my strong admiration for the brand and its leadership. The day of publication, I got an email from Blake saying how much he appreciated my kind words. While it was a very small gesture, no doubt aided by an assistant, it still meant a lot to me. I have told this story to several people who knew Blake personally, and they all basically say the same thing: “Oh, yeah, that’s just the kind of guy he is.”

As I reflect on Blake’s death on Wednesday at 58, I am reminded that in business—and I suppose in our culture more broadly—we often focus intensely on what is achieved (record growth, improved profit margins, number of followers, awards, etc.) and much less on how it is done. And it is hard to understate what Nordstrom, the retailer, has achieved during a time of tremendous change and disruption. Given Nordstrom’s leadership structure, it is hard to say precisely what Blake was responsible for, but it is not difficult to highlight some of the major accomplishments during his tenure.

1. A memorable experience. For the most part, the department store sector is boring, characterized by me-too assortments, lookalike environments, rampant promotions and uninspiring customer service. While others swim in a sea of sameness, Nordstrom has remained remarkable by keeping its stores current; remaining committed to personal sales attention; curating interesting, fresh and highly relevant assortments; and resisting the temptation to put just about everything on sale all the time.

2. Digital leadership. Nearly two decades ago, the company saw the potential of digital commerce, not only as a transaction but also as a key driver of its brick-and-mortar business, and invested well ahead of the curve. Today, Nordstrom has among the highest e-commerce penetration of any traditional retailer (over 30%) and is one of the few whose growth in online sales is actually accretive to earnings.

3. Harmonized shopping. Nordstrom was one of a handful of retailers that understood early on that the customer is the channel and it’s all just commerce. Accordingly, the company committed to being channel agnostic and began investing in creating a truly seamless experience across channels many years ahead of its competition.

4. Innovation. Unlike virtually every other retailer that has been around even half as long, Nordstrom has been on the leading edge of just about every major trend in retail. It pioneered upscale off-price retail. It invested early and heavily behind its e-commerce business. It has been willing to experiment early and often with social, mobile, personalization and new modes of shopping (Trunk Club). It was among the first to open an innovation lab, and in a sign of its commitment to radical experimentation, the company shut it down and moved on when it was no longer delivering the desired results.

5. Smart diversification. Nordstrom has leveraged its core with new stores in Canada and New York City. It has invested aggressively behind its faster-growing Nordstrom Rack division and acquired HauteLook to enhance its capabilities. Now it is piloting its new merchandise-free, service-centric concept called Local as a way to extend customer reach and better meet customers where they are.

6. Solid, profitable growth. At a time when many other mall-based retailers are closing hundreds of locations and struggling to stay afloat, Nordstrom has defied both the retail apocalypse narrative and the multi-decade secular decline of department stores, managing to grow relative market share, sales and profits. That is no small task and one for which I do not believe it gets enough credit.

It probably goes without saying that it is always sad when someone dies—and especially so when it happens at such a young age. I know I am among many in both Blake’s immediate and extended family who are deeply saddened by this news. While we mourn his passing, we can (and should) celebrate not only the “what” of his accomplishments but how he did it: with integrity, passion and kindness. Ultimately, the values Blake Nordstrom embodied and reinforced will be his gift and his legacy.

As Maya Angelou reminds us, “people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

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.  

Next week I’ll be in NYC attending the NRF “Big Show” and participating in various related events, including a special “fireside chat”. On January 24th I’ll be keynoting the ICSC Nexus Conference. In February I’m headed down under.


Was 2018 the best holiday shopping season in years? Well, what do you mean by “best”?

If you are the sort of person who tracks stories on retailers’ holiday sales performance you know a certain ebullience has set in. On the heels of optimistic forecasts by the National Retail Federation and others, Mastercard’s SpendingPulse indicates that retail had the “best” season in six years, with overall sales growing 5.1%. Online shopping alone was up over 19%. So there should be joy throughout the land right? Well, not so fast. Before we declare victory a few things must be kept in mind.

The holiday season isn’t quite over. Mastercard’s survey covers the period between November 1 and December 24. That just simply isn’t the whole picture. For one thing, the week after Christmas is a huge week for retailers. And it is the final week of the year and the beginning of January when most holiday gift cards get redeemed. Similarly a big percentage of holiday returns and exchanges get done during this time. Until this all nets out we simply lack the complete picture.

Your mileage may vary. We should all know the flaw with averages, and when it comes to dissecting retail success the industry is no different. The Mastercard data reveals a wide distribution of outcomes at the category level. Leading the way was apparel, which was up 7.9%, and home improvement, up a whopping 9%. Alas department stores got another lump of coal in their stocking, continuing their string of declines. Electronics and appliances also saw sales drop.

A tale of two cities. While I generally avoid making specific predictions I often get asked to weigh in on anticipated “winners & losers” of the holiday season and my typical, albeit more than a little smart-alecky, answer is always the same: the same brands that have been winning and losing all year. It turns out that retailers that have remarkable and relevant business models going into the season continue to do well. Those that have boring value propositions (or are executing poorly) continue to struggle. So the notion that a strong tide will cause all ships to rise sounds true, but often isn’t. When the dust settles and we dissect the numbers it’s pretty likely that the collapse of the middle will be even more evident.

Yeah, but what about profits? The only thing we know anything about are sales numbers. I hate to break it to you but it is possible to drive sales growth without actually making money. Ask Wayfair. Again, mileage will vary considerably here–and we won’t have more useful information until retailers report their quarterly numbers. Yet a few things should give us pause. First, a few studies–and my own anecdotal experience–suggest the rate of discounting was quite high. Until we see how gross margins come in we won’t know how bright the season was or wasn’t. Second, the continuing shift to e-commerce generally isn’t accretive to margins for most retailers–particularly given the higher rate of returns and growing fulfillment costs. Third, there is a fair amount of expense creep, be that from rising wages, the tariff nonsense or handling the huge jump in BOPIS orders. My best guess is overall retail profits will grow more slowly than overall revenues.

Storm clouds on the horizon? Even if most retailers post a strong fourth quarter there are reasons to temper expectations as we begin 2019. While the most recent stock market gyrations may owe more to the chaotic American political climate, retail investors are definitely tapping their brakes. Moreover, consumer confidence is beginning to wane. And if the partial US government shut down goes on much longer it’s hard to imagine that won’t have a material dampening effect.

So at the risk of being a bit Clinton-esque, to call it the best holiday season, we really have to define what “best” is. We also need to be a bit more patient.

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.  

The week of January 13th I’ll be in NYC attending the NRF “Big Show” and participating in various related events, including a special “fireside chat”. On January 24th I’ll be keynoting the ICSC Nexus Conference. In February I’m headed down under.


The 3 big problems with omnichannel retail

In early 1999, as a fairly recently minted VP, I found myself at a posh Arizona resort attending Sears annual “strategic leadership team” meeting. At the final session of our retreat then CEO Arthur Martinez made a bold–and as it turns out rather prophetic–statement which went something like this: “the future of Sears will be dictated by our ability to meet our customer’s needs anytime, anywhere, anyway.” A few months later I was appointed Sears’ new Vice President of Multichannel Integration.

Nearly twenty year later, multichannel has morphed into “omnichannel” (thanks Terry) which, in turn, has spawned a cottage industry of related jargon: “cross-channel integration”, “seamless shopping”, “unified commerce” and so on. Today many retailers still justify their investments in all things omnichannel by stating that customers who shop in multiple channels are their best customers. Of course by definition the customers that like a brand the best tend to do everything more. So as much fun as it is to point out confusing correlation with causality the best reason to make these investments is always going to be because customers value them.

As more retailers seem to finally be waking up to the fact that it’s all just commerce and that all this talk about channels is mostly noise, it’s worth taking a hard look at the state of omnichannel retail and some of the oft over-looked–and potentially highly problematic–issues.

Customers don’t care about channels

During my nearly 30 years in retail I’ve heard my colleagues talk about the catalog channel, the e-commerce channel, the store channel, the mobile channel, the home shopping channel and on and on. Maybe this was an interesting distinction a decade ago. But for many years now, for just about every category, for just about every customer, the distinction between channels has been evaporating. We no longer go online, we live online. Some sort of smart device is a nearly constant companion in many customers’ journeys, with the result being that we can go back in forth between a digital channel and a physical channel in an instant. Digital drives brick & mortar and vice versa. The problem for far too many retailers is that they still are stuck in their channel-centric thinking and their organizations, metrics, systems and incentives still reflect that. Embrace the blur. Silos belong on farms.

It’s not about ‘all’. It’s about relevant and remarkable where it truly matters.

At one level, being everywhere the customer is sounds like a good strategy. Except far too many retailers took the “omni” to the extreme, and in the quest to be everywhere they mostly ended up being nowhere. Meeting the consumer where she is AND actually being good at all of it is neither easy nor inexpensive. While the industry still lacks a consistent working and useful definition of what “omnichannel” really means it seems obvious that many brands embarked on a “get me some of that omnichannel stuff” and spread themselves way too thin. As we should all know by now, trying to be everything everywhere for everybody is a fool’s errand . It is far better–for both customers and investors–to instead focus on delivering a harmonized experience; by which I mean focusing on eliminating the discordant notes and amplifying the wow in the customer journeys for those customers that have the greatest current and future value. Without this, we risk diffusing our efforts and falling further and further behind those that have a laser focus on being relevant and remarkable where it actually makes a difference.

The omnichannel migration dilemma

Retailers that do a superb job of focusing their omnichannel investments strategically can still face the harsh reality that creating a harmonious shopping experience is often terribly expensive. And for those that are playing competitive catchup, many millions can be spent only to even the playing field, not create a meaningful advantage or generate clear ROI. And even if a brand can stomach the heavy capital costs, the marginal economics of e-commerce are often worse than brick & mortar, primarily owing to high customer acquisition costs and/or skyrocketing fulfillment expenses. The situation is often made worse by aggressive (some would say irrational, uneconomic or even predatory) product and delivery pricing on the part of brands that value hyper-growth over profits. So as e-commerce continues to grow 3-5 times faster than physical store sales, even the best omnichannel retailers may see margin erosion.

For consumers just about all of this is good news. Prices are better, choices continue to expand and shopping is ever more convenient. For brands, it’s never been more important to understand consumer behavior, embrace the blur and to take a laser-like approach to executing a strategy that is harmonious and intensely customer relevant and remarkable. Otherwise omnichannel can easily be far more a problem than an opportunity.

Recently, brands like Walmart and Target have been applauded for upping their e-commerce and “omnichannel” games and for taking on Amazon more aggressively. From a customer relevance standpoint this is all good. Whether investors will like the outcome is another matter entirely.

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.  

Later this month I’ll be in NYC attending the NRF “Big Show” and participating in various related events. On January 24th I’ll be keynoting the ICSC Nexus Conference.


My top ten Forbes posts of 2018

As is my tradition, I start the year with a quick look back at the posts that got the most engagement in my role as a retail contributor for Forbes. Shockingly, none of the top ten were about Sears.

So here, in order of popularity, is the top ten.

  1. It’s just about time for full on panic at JC Penney
  2. Physical retail isn’t dead. Boring retail is.
  3. The ticking time bomb of e-commerce returns
  4. JC Penney goes back to the future. But it’s likely too little, too late
  5. Apparently these brands did not get the ‘retail apocalypse’ memo
  6. A baker’s dozen of provocative retail predictions for 2018
  7. Retail 2018: Now comes the real reckoning
  8. Is IHOb a big nothing burger?
  9. E-commerce may be ‘only’ 10% of retail, but that doesn’t tell the whole story
  10. Wayfair, StichFix and e-commerce’s scaling problem.

And some of you are old enough to get this reference because this list goes to 11

Nordstrom and retail’s growing urgency to re-think performance metrics

Best wishes to everybody for a safe, productive and purpose-filled New Year.