Easy to measure, not all that useful

For a long-time the retail industry has focused on same-store sales as the primary measure of a retailer’s success. This ignores the fact that a brand can drive a sales increase through excessive promotions and completely destroy profitability. It fails to recognize that we can teach consumers to become promiscuous shoppers and have them show up in droves during a given sales event while completely undermining true loyalty. It neglects the reality that total channel performance in a given trade area is a better metric because comp store sales don’t account for the role of a physical presence in creating a viable e-commerce model.

More recently, we’ve latched onto the growth of e-commerce as a key barometer for success, failing to acknowledge that virtually every pure-play brand has an unsustainable business model that is rapidly approaching its expiration date. We also seem to forget (or deny) that for most established omni-channel retailers the outsized increases are merely the result of existing customers shifting their sales away from a physical store to a channel with typically far worse economics (owing primarily to incredibly high fulfillment costs).

We work to optimize the ratio of digital ad spending to digital sales, even though we know that digital mostly drives physical channel volume. Worse yet, we make these sort of measures a part of an incentive scheme that reinforces the silo-ed behaviors that undermine customer-centricity.

We obsess over our e-commerce conversion rates even though they are highly imperfect measures of long-term consumer engagement and retention and we know that so much of our traffic is really part of the customer’s journey to a brick & mortar location anyway.

Attribution is messy. Economics is messy. Getting our organizations and constituencies to let go of metrics, processes and habits that are no longer relevant is messier still.

Yet just because we’ve always done it that way is a terrible reason to continue doing so.

Just because someone else expects us to do it doesn’t mean we have to.

Just because it’s easy to measure doesn’t make it useful.

And just because doing something is hard or imperfect doesn’t mean it isn’t worth trying.

 

h/t to Seth for inspiring this post.

Without official rank or title

Perhaps we’ve forgotten that Martin Luther King Jr. was never elected to run the civil rights movement or appointed to the job. He didn’t have “take on the entire nation’s long history of racial injustice” in his position description as a Baptist minister. And I’m fairly certain he didn’t suddenly decide to go change the world because he was ordered to do so by his boss, a Board of Directors or some steering committee. In fact, while he was encouraged by many, he was also vilified and challenged by many more.

We can only wonder what might have happened had King decided to wait around to be officially anointed or had hesitated to act boldly in the hope that others might step up first to take the heat and scorn.

Decades after King’s work the “is-ness of today” still stands in stark contrast to “the ought-ness of tomorrow.”

And every day we remain confronted by opportunities to challenge a status quo that isn’t working across many aspects of our lives and those of our brothers and sisters.

Sometimes that challenge shows up as a minor slight, other times it’s a devastating hurt. Sometimes it’s a system that simply doesn’t serve clients all that well, other times it’s one that perpetuates systemic injustice.

Every day we get to choose whether we will assume it’s always someone else’s job to act or whether we will be an uncrowned leader. Every day we decide whether it matters whether it’s in our official job description to step up or whether it is our personal responsibility as a part of our shared humanity.

If we plan on waiting to make a difference in the world until we get promoted or it’s in our job title we are likely to be waiting a long, long time.

As President Barack Obama reminds us “the arc of the moral universe may bend towards justice, but it doesn’t bend on its own.”

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Stop blaming Amazon for department store woes

Given Amazon’s staggering growth and willingness to lose money to grab market share it’s easy to blame them for everything that is ailing “traditional” retail overall–and the  department store sector in particular.

In fact, with announcements last week from Macy’s to Kohl’s and Sears to JC Penney that could only charitably be called “disappointing” many folks that get paid to understand this stuff reflexively jumped on the “it’s all Amazon’s fault” bandwagon. Too bad they are mostly wrong.

The fact is the department store sector has been losing consumer relevance and share for a long, long time–and certainly well before Amazon had even a detectable amount of competing product in core department store categories.

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The fact is it’s just as logical to blame off-price and warehouse club retailer growth–which is almost entirely done in physical locations, by the way–for department stores’ problems.

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The fact is that, despite other challenges along the way, Nordstrom, Saks and Neiman Marcus have maintained share by transitioning a huge amount of their brick & mortar business to their online channels and have closed only a handful of stores in the last few years. Nordstrom and Neiman Marcus now both derive some 25% of their total sales from e-commerce.

Don’t get me wrong, I’m not saying that Amazon isn’t stealing business from the major department store players. Clearly they are. And as Amazon continues to grow its apparel business they will grab more and more share.

But the underlying reason for department stores decades long struggle is the sector’s consistent inability to transform their customer experience, product assortments, marketing strategies and real estate to meet consumers’ evolving needs.

More recently, those brands that have been slow to embrace digital first retail are scrambling to play catch up. Those that still haven’t broken down the silos that create barriers to a frictionless shopping experience will continue to hemorrhage customers and cash.

Most importantly those that think they can out Amazon Amazon are engaged in a race to the bottom. And as Seth reminds us, the problem with a race to the bottom is that you might win.

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The store closing panacea

There has been a strong and growing narrative that the single smartest thing a struggling retailer can do is to close stores and, in some cases, a lot of them. I first touched on this nearly three years ago in my post “Shrinking to prosperity: The store closing delusion.”

There is no question that, in aggregate, the United States has too much retail space. There is no question that, in concept, the growth of e-commerce can allow an omni-channel retailer to serve some trade areas more profitably without a store and some trade areas with a smaller box. The key is to understand “some” and that starts with understanding why a given brand is under-performing in the first place. The other key is to understand the role that brick & mortar locations play in driving e-commerce–and vice versa.

In most cases, as recent events are bearing out more and more, store closings make an already irrelevant retailer less relevant. And frequently much less profitable as well.

Nearly 90% of traditional retail is still done in physical stores. In five years it will still be about 85%. The math is not that complicated.

Make it harder to get to a store OR make returns in a store OR order online and pick up in a store OR go to a store to research potential purchases OR learn about the brand, etc. and a retailer is almost certain to lose way more business (and margin dollars) to a competitor’s physical store in the vacated trade area than the brand “rationalizing” its store count will ever be able to make up through its website. This is why JC Penney, Home Depot and Lowes should write Eddie Lampert thank you notes pretty much every day.

Moreover, the symbiotic nature of digital and physical channels should not be ignored, yet often is. Several retailers–Sears is perhaps the best example–made the assumption that by investing in digital at the expense of physical stores they could more profitability serve their customer base over the long-term. As it turns out (and as more retailers are learning), e-commerce is often less profitable at the margin than brick & mortar operations and that when you close stores you actually make it more difficult for your e-commerce business to thrive. Oops.

Any retailer in trouble should absolutely analyze whether closing and/or “right-sizing” stores will be accretive to cash-flow. But that analysis MUST include the impact on long-term competitiveness and digital channel sales in the affected store’s trade area. Thinking you are helping when in fact you are merely initiating a downward spiral is a pretty big mistake to make.

Any analyst pushing for store closings and footprint down-sizing should be mindful that it is almost never the case that a struggling retailer’s ills are because they have too many stores or that the stores they have are fundamentally too large. Rather, it is because their brand relevance is not big enough for the channels, both physical and digital, that they have. Be careful what you wish for.

Show me a retail brand that is remarkable and relevant enough to command the share of attention that drives share of market and I’m virtually certain their executives are not spending a second on down-sizing. In fact, most are opening physical stores (e.g Nordstrom, Warby Parker, Amazon, TJX) and, in many cases, a bunch of them.

Show me a retail brand that is consumed with store closings and expense reduction and there is a pretty good chance they are a dead brand walking.

 

Thanks to those who have encouraged me along my path as I took a six month break from writing this blog. During my sabbatical I started a new blog on waking up to a life of love, purpose and passion at any age, which can be found at http://www.IGotHereAsFastAsICould.blog.

My top blog posts of 2016

As has become an annual tradition–and despite my nearly six month hiatus–I present my most popular blog posts from this year.

  1.  I am the captain now
  2.  A few inconvenient truths about e-commerce
  3.  Sears: The one thing that could have saved them
  4.  Quitting is underrated
  5.  Umm, so why aren’t your sales better?
  6.  Pure play e-commerce’s fantastic (and unsustainable) wealth transfer
  7.  The struggles of the flying trapeze artist
  8.  The new retail ecosystem: NRF edition
  9.  Retail’s big reset
  10.  I’m going to build and wall and get Amazon to pay for it

And here are a few more that didn’t put up huge numbers, but are personal favorites.

  1. Just about everything is noise
  2. Retail’s museums of disappointment
  3. Don’t bite the hook
  4. The magical mystery powers of gratitude
  5. Put your ass where your hearts wants to be

As I wrap up my seventh year writing this blog I am incredibly grateful for your attention, support and feedback.

Best wishes for a safe, happy and prosperous New Year!

And if you get a chance check out my other blog “I got here as fast as I could.”

The magical mystery powers of gratitude

While I am still on a hiatus from this blog for a bit longer, some of you might know that I have launched another blog focused on living a life of passion and purpose. It’s called “I got here as fast as I could.” I hope you’ll check it out. Below is my post on my new blog in honor of Thanksgiving.

For a long time the power of gratitude eluded me.

Sure, there were times when the position of privilege I was born into, or had attained, was obvious. I could appreciate a trip I took, a fancy new thing I bought, a great meal. I’d say “thanks” for a gift or a job well done or some little bit of kindness extended to me.

I suppose I mostly saw gratitude as transactional.

But if I’m honest, much of the time I was focused on what was lacking. The sense that I wasn’t achieving my potential at work and in my life was a near constant. My internal monologue was consumed by thoughts that I should possess more and sexier stuff, dominate my to-do list, achieve greater status, be in better shape, have everyone like me and on and on. I was feeling more than a wee bit entitled. I was rarely, if ever, satisfied.

In 2009, when I was still in the throes of a personal crisis that had rocked me to my core, the therapist I was seeing patiently listened as I recited yet another tale of woe. As I got to one of my favorite (and by then oft-repeated) complaints, he stopped me.  In that somewhat condescending voice all psychologists seem to employ he said “Steve, I wonder if would you be willing to tell me 30 things that you are grateful for right now, at this moment?”

I pushed back. “3o things? I don’t think so.” He encouraged me to just start.

The first few came easily. I had a nice house in a safe neighborhood, a decent amount of money in the bank, a great family. A few more things trickled on to the list with a bit more reflection.

When I stalled at about 8 or 9, my therapist made a few suggestions. “What about the way Charlie (my dog) greets you when you come home? How about the knowing smile on your daughter’s face when you make one of your dumb Dad jokes? How about the fact that you don’t have to worry for even one second whether you’ll have safe water to drink?

He paused to let that sink in. My throat grew tight. “Keep going” he said.

And I did. Spoiler alert: I had no trouble getting to 30.

I left that session feeling better than I had in months. I came, albeit slowly, to see how gratitude is the antidote to my habituated negative thought patterns, the kryptonite to feelings of emptiness and loneliness. I adopted “I have enough, I do enough, I am enough” as a mantra.

My list of things that I’m thankful for is now much greater than 30. The list also includes a lot of actual human beings. It turns out gratitude is relational.

It also turns out gratitude has the power to heal. It turns out that extending gratitude to another person fosters connection–and we all need more of that. It turns out that just waking up today is reason enough to be grateful.

I wish someone had told me that earlier, but I got here as fast as I could.

 

On this day when many are celebrating Thanksgiving I’m grateful to my friend Seth who generously shares his Thanksgiving Reader. Check it out.

I’m also thankful that I have one friend in my life who will tell me the truth even when it hurts and who constantly challenges me to be a better person. And I’m grateful that I’ve been willing to (finally) tell her how much that means to me.

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Gone fishin’

After 6 years and more than 500 posts I’m taking a break.

It’s time for me to recharge the batteries, repot the plant, hit the reset button or whatever cliche floats your boat.

For the next several months I’m putting the kibosh on taking on new consulting gigs and generally saying “no” to anything that can be deemed “corporate.”

I’ve begun looking at everything I do–and own–and asking whether it truly gives me joy. It’s leading to a lot of decluttering. I feel lighter already.

I’ve also begun tapping into the power of ‘no’ and the power of ‘now.’ I feel more than a wee bit liberated.

On the other hand, I will be saying ‘yes’ to more travel, to expanding my knowledge of the crazy world we live in, to cultivating maitri and to advancing my work in the social impact space.

It’s fun and energizing. It’s also a little bit scary. Of course that is the nature of anything really worth doing.

So fair warning: if you feel like I’m ignoring you it’s pretty likely to be true. But it’s not personal. Trust me, it will be fine.

Some people that I’ve told of my plans have looked at me like a confused german shepherd. To them I say, well, maybe I’m crazy. But after all, it’s not about you.

Others have said “I’m so jealous, I wish I could do that.” To them I say, well, what’s stopping you?

Anyway, thanks for giving me the gift of your attention. It means a lot.

See you in another life brothers and sisters.

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