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.

A really bad time to be boring · Store closings

Dead brand walking: Sears is going out with a bang

In the weird irony that is often part of retail (and life in general), Sears Holdings recently announced its first quarter of comparable sales growth in many years—and I believe only its second or third since I left the retailer in 2003! It turns out that the liquidations sales being held in the many Sears and Kmart locations that were closing during the quarter finally brought out customers in droves. Better late than never, I suppose.

Of course, the world’s slowest liquidation sale is not yet over, but it’s hard to take this dead cat bounce as a positive indication of anything substantive.

Last week also brought two other pieces of Sears news. In a classic “you broke it, maybe you want to own it” moment, the hedge fund led by Sears Chairman Eddie Lampert offered to buy the nearly dead retailer. In a statement that seems certain to guarantee Lampert’s fast track admission to the reality distortion field Hall of Fame was this gem: “Sears is an iconic fixture in American retail and we continue to believe in the company’s immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure.” In related news, I set fire to a big pile of cash.

The other big story was that Sears cancelled the auction designed to improve upon Service.com’s $60 million “stalking horse” offer when the effort failed to generate a single additional bid. The lack of interest in this once sizable and profitable unit (which was valued at many hundreds of millions of dollars during my Sears tenure) is yet another sign of how far Sears has fallen during the past decade and how little residual value the market sees in many of its pieces.

It may turn out that Lampert and his investors will do reasonably well when all is said and done in the sad saga of Sears’ demise. I’m not smart enough to figure out exactly how all the financial engineering and picking at Sears carcass will ultimately benefit them. But two things are clear: First, during his nearly 15 years at the helm of the bad marriage that is Sears and Kmart, Lampert has never once articulated a compelling and remarkable strategy to guide the retailer. Instead, we’ve had an endless parade of nonsensical tactics, relentless cost cutting and seemingly self-interested asset stripping. In return the company has sustained well over a decade of precipitous market share declines and massive operating losses. In fact, despite operating in one of the best quarters in recent U.S. history, despite closing hundreds of “bad” locations and despite taking an axe to other operating costs, Sears still managed to lose nearly $1 billion on barely over $2.7 billion in revenue this quarter.

Second, the notion that anything can be done to save Sears in a way that remotely resembles its once iconic status is absurd, particularly as Lampert holds on to the idea that the brand can shrink its way to prosperity. Sears has never fundamentally had a cost problem. It has, for at least 20 years, had a huge customer relevance and remarkability problem. Closing more stores and shrinking and/or leasing out the ones that remain may temper losses, but it will never do anything to address the core issue which, simply stated, is having enough customers that want to buy the stuff they sell.

I am certain that over the coming months there will more stories of asset sales, store closings and largely random new program offerings designed to return Sears to its former glory. It’s all just noise, far more like the like gasps of a dying man than a glimmer of hope for any form of resurrection.

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.  

A really bad time to be boring · Retail · Store closings

The critical question for struggling retailers: Too much store or not enough brand?

I suspect hardly anyone is surprised when an ailing retailer announces plans to shutter locations en masse. Across the last several years we’ve seen dozens of once mighty chains close hundreds of stores in hopes of staving off a trip to the retail graveyard.

Last week, having already closed some 120 stores in a bid to shrink to prosperity, Macy’s announced that it plans to eventually reduce the size of many of its under-performing stores. These “neighborhood stores” (four of which are currently being tested) will also undergo merchandising and service changes. In a Wall Street Journal article discussing the new strategy I was quoted as saying ““If you’ve got too much space, it means your brand isn’t resonating. It’s not a real estate problem, it’s a brand problem.” And while that quotation was a bit out of context and not meant specific to the viability of Macy’s new strategy, I do think it’s critical for retailers to be sure they are working on the right problem. From my experience, more times than not, a massive retrenchment of brick & mortar space is most often an indication of poor customer relevance, not bad real estate.

Of course, this does not mean retailers should not prune store locations and/or look to resize current (or planned future) locations. Clearly real estate decisions, be they specific location or size of footprint, need to reflect today’s consumer and competitive situation. And we know that the United States is, on average, significantly over-stored. We know that some retailers went a bit wild and crazy with store expansion plans in an era of cheap money. We know that the growth of e-commerce can often cause a radical rethink of physical asset deployment. Some store closings and some optimization of space is inevitable for most retailers.

If a consolidation of a retailer’s real estate portfolio, along with a robust digital strategy, results in a more remarkable customer experience that, in turn, leads to growing customer value then the strategy may well be sound. But this is rarely the case. Usually the shrinking to prosperity strategy is driven by a lack of physical store sales productivity which has been caused by losing market share to competitors with a better value proposition. So–at least in theory–you can improve productivity metrics by reducing the denominator. But that presumes that sales (the numerator) are at least stable. And the track record on that is poor. Show me a list of retailers that have cut their square footage massively in recent years and you’ve pretty much got a list of bankrupt or nearly bankrupt brands.

A lot of times Amazon–or e-commerce in general–is cited as the reason that retailers need a lot less square footage. Unfortunately this argument doesn’t hold up all that well. In turns out there are plenty of “traditional” retailers that have winning value propositions that are doing little if anything to the size of their stores. In fact many are opening stores. This is because their value proposition is unique, highly relevant, remarkable and well-harmonized across channels. I very much doubt Apple, Sephora, Costco, Nike, TJX, Neiman Marcus, Nordstrom, among many others, will be announcing major contractions of their physical space anytime soon because their brands are more than big enough for their real estate.

Of course, the impact of e-commerce and shifting consumer preferences affect different categories quite differently, so there is no one size fits all prescription when it comes to any given retailers situation. Having said that, it always gives me pause when a brand that (allegedly) serves a large audience and derives most of its sales from brick & mortar locations discovers it must shut down a store in an otherwise well performing mall or in a trade area that has oodles of other “national” retailers that are not struggling in the least. Again, this suggests the problem is with the brand, not the location.

For Macy’s in particular, their neighborhood store strategy may well turn out to be value enhancing. Time will tell. But in some ways it is akin to admitting defeat in those trade areas unless other aspects of their overall digital strategy lead to meaningful market share growth.

When retailers get into trouble the easy thing to do is cut costs. Most struggling retailers have the expense optimization hammer and are always looking for the next nail. What’s harder, but ultimately far more important, is to become truly customer-obsessed and to invest behind being more remarkable than the competition. Until that happens, whether we are talking about Sears, JC Penney, Dillard’s, Kohl’s, Macy’s or any other brand that remains largely stuck in the boring middle, shrinking is not going to be the answer.

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’m honored to have been named one of the top 5 retail voices on LinkedIn.  Thanks to all of you that continue to follow and share my work.

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

JC Penney goes back to the future, but it’s likely too little, too late

At one level, the announcement that JC Penney was going to stop wooing younger customers in favor of focusing on baby boomer moms seems to make a lot of sense.

During the devastating Ron Johnson era, Penney’s was practically driven out of business by trying to execute what I call the customer trapeze way too quickly while simultaneously doing a number of other bone-headed things. In a bid to “contemporize” the brand, Johnson dropped many (it turns out profitable) lines that were deemed old and stodgy in favor of more fashion-forward assortments aimed at attracting younger customers. And sales promptly fell off a cliff. The more-than-a-century-old retailer has been trying to dig itself out of this hole ever since.

In the intervening five years, Penney’s has tried a more balanced approach. Yet despite adding back some customers’ preferred brands, launching new products and services, retooling many aspects of its go-to-market strategy and having hundreds of its competitors’ doors close, the retailer has failed to build any sustained momentum. As I wrote a couple of months back, clearly Penney’s needs to try something new, and unquestionably it needs to do it with great urgency. Unfortunately, this latest gambit is very unlikely to work.

The most obvious problem with a return to focusing on middle-age moms is that it is essentially the strategy Penney’s was executing against before Ron Johnson showed up. And while Johnson set the house on fire, Penney’s was far from lighting things up during the years leading up to the failed “transformation.” In fact, growth and profits had stalled, and the stock was selling at less than half its historical high.

So as Penney’s goes back to the future, the one thing we know for sure is that the market it was trying to succeed in almost a decade ago is now considerably smaller and quite different. On-the-mall, moderate apparel and home stores have been steadily losing share to off-price/value-oriented off-the-mall competitors for many years. More recently, Amazon and other online players have set their sights on the segment as well — and most department stores are struggling mightily to keep pace. By going back to its old customer focus in a market that has shrunk considerably, Penney’s would have to gain more market share than it was able to do when things were far less competitive. That strikes me as a very tall order.

Even under the assumption that a more tightly focused customer strategy has merits, Penney has plenty of other hurdles to overcome. Like most retail brands stuck in the boring middle, it continues to swim in a sea of sameness, with repetitive products, me-too promotions, mediocre service and mostly uninspiring stores. Going deeper on a particular customer segment may provide some incremental upside in the short term, but it is hardly sufficient to make it materially more relevant and remarkable.

The retail formula for growth is, at one level, simple. Target a big enough audience. Increase traffic. Increase conversion. Increase average spending. Increase frequency. Rinse and repeat.

Doubling down on any one customer cohort may hold the promise of performing materially better on one or more of these factors. But given how the particular part of the market Penney’s is returning to has contracted, one has to make some pretty incredible assumptions to believe it can possibly drive meaningful and enduring profitable growth.

Moreover, I would argue that no retailer can sustain itself over the long term without a powerful customer acquisition strategy. And here demographics are hardly JC Penney’s friend. A decade ago Penney’s was struggling partially because it had not done a good job of attracting new, younger customers. It’s no different today as Millennials are sure to become a more significant potential source of volume.

To survive, much less thrive, Penney’s must learn to walk and chew gum at the same time. It must avoid, as Jim Collins likes to say, “the tyranny of the or” in favor of “the genius of the and.” A portfolio approach to customer acquisition, growth and retention is at the heart of any good strategy, and Penney’s must find ways to both leverage its historical core and attract the next generation of customers.

Plenty of retailers have suffered from casting too wide a net and ending up not being relevant and remarkable to any group of consumers in particular. Yet brands can cast too narrow a net as well. My fear is that this is exactly what Penney’s is electing to do. From where I sit, it simply cannot afford any more strategic missteps.

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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.  

My speaking page has been updated with several new gigs. See the latest here.

A really bad time to be boring · Innovation · Retail

Will Macy’s ignite a new era of legacy retailer innovation?

The moderate department store sector has been struggling for some two decades; first losing share to category killers and discount mass merchants, then to off-price retailers and now, increasingly, to Amazon. Since 2008, department stores’ share of total retail has sunk from 2.8% to about 1.7%. Over 1,000 stores have been shuttered during the past few years with more sure to follow. J.C. Penney and Sears have seen their market values collapse, while Kohl’s, Dillard’s and Macy’s have significantly underperformed the market.

Recently, however, a certain ebullience has returned to the sector as financial performance has improved. Some observers now see a rebirth, while others are a bit more skeptical. It may well turn out that the past few months’ gains are more dead cat bounce than renaissance. Yet Macy’s has garnered considerable attention by stepping up its growth efforts under CEO Jeff Gennette. The first big step was announcing its Growth 50 Strategy earlier this year. Then, in just the past six weeks, two significant deals were announced. In early May, the company acquired Story, the Manhattan-based concept store, and made its founder Rachel Shechtman Macy’s new “chief brand experience officer.” And then just over a week ago Macy’s entered into a strategic alliance with b8ta, the experiential retailer and technology platform.

It remains to be seen whether these initiatives help relieve the epidemic of boring that struck Macy’s and its brethren years ago. Materially and fundamentally altering Macy’s stuck in the middle trajectory will take more than a couple of deals that look to affect a small percentage of its total business. The operational, experiential and product changes that are part of Growth 50 appear solid, but are far more evolutionary than revolutionary. And all of this comes against a backdrop of increasing competition from off-price retailers that are opening substantial number of stores (and aren’t yet close to mastering digital commerce), along with Amazon’s growing push into fashion.

Macy’s improved financial performance has to be put in the context of the broader market (Macy’s is barely keeping pace) and these innovation moves must be put in the context of their potential materiality (they aren’t likely to be). Still, Macy’s is to be applauded for its willingness to act and to embrace what I call a “culture of experimentation.” Given that the sector Macy’s competes in is virtually certain to keep shrinking, the only way for Macy’s to drive consistent, material profitable growth will be for them to steal significant market share. That will take more than incremental improvements or a random set of experiential pilots. These moves seem like a good, albeit limited, start.

While it’s easy to blame Amazon (and others) for the troubles that have befallen so many legacy retailers, the reality is that most of the wounds are self-inflicted. Too many of these retailers, including Macy’s, watched the last 15 or 20 years happen to them. They seemed to be believe that they could cost cut their way to prosperity and that mere tweaks to their product offering and customer experience would move the dial. Now, as many of them inch closer to the precipice, a few are acting—some rather more boldly than others.

The fact is they have no choice. The middle is collapsing under the weight of boring product, boring marketing and boring experiences. And you could not have picked a worse time to be boring. The only way out is to be dramatically more customer-relevant and to deliver a remarkable experience at scale. Being digital-first, offering a seamless customer experience, along with all the other buzzwords the pundit class likes to throw around (myself included) are fast becoming table-stakes. Necessary, but far from sufficient.

Traditional retailers are often pretty good at following others’ leads. I suspect that as Macy’s makes additional moves, many will be emulated by competitors. Yet the idea that legacy retailers will finally wake up to the need to be fundamentally more innovative seems unlikely. They mostly watched when it was clear that e-commerce was going to revolutionize shopping. They mostly stuck to channel-centric thinking and silo-ed behavior when it became clear that the customer was the channel. They mostly remained rooted in one-size-fits-all marketing strategies when it was obvious that we needed to treat different customers differently. And they continue to rely on store closings as a silver bullet, when the real problem is operating a brand that is not big enough for the stores they have.

Adding to my dire and admittedly cynical outlook is that many of the retailers that need to innovate the most still have no clue how to do it and, even if they did, lack the cash flow to make it happen. Sadly, for many, this will end badly.

For them, as the saying goes, the biggest problem is that they think they have time.

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.  For more on my speaking and workshops go here.

A really bad time to be boring · Retail · Store closings

Sears: The world’s slowest liquidation sale picks up the pace

The Lampert Delusion might be a good name for a Robert Ludlum novel. Unfortunately it is more apropos of the apparent strategy Sears Holdings’ principal shareholder and CEO is employing to try to save the flailing retail chain.

Regular readers may remember that I have been calling Sears “the world’s slowest liquidation sale” since 2013 as it became clear that Lampert had no credible strategy to stop Sears and Kmart from sinking further into irrelevance–much less restoring them to meaningful profitability. Since then, nothing material has been done to get the brands back on track, and asset after asset has been unloaded to fund widening operating losses.

The good news — in one way of looking at it — is that Sears had significant fungible assets of decent value to raise cash and a more than cozy relationship with a few willing buyers. Unfortunately, in many cases, by the time Sears sells off something, it is doing so at fire-sale prices and in a manner that only further weakens its core business. Which is why my provocative post from 2014 is looking more prescient every day.

So while Lampert has been slinging strategic nonsense for over a decade, he has been able to keep Sears Holdings alive well past its expiration date. However, today’s action to close yet another bunch of stores is almost certain to accelerate Sears’ trip to the retail graveyard. Here’s why:

First, and most importantly, closing stores does precisely nothing to improve customer relevance. Neither Sears nor Kmart suffers from a “too many stores” problem. They suffer from being boring, irrelevant and poorly executed retail concepts. Tellingly, both have exited multiple markets and trade areas that lots of other similar retailers make work. There is a reason the Kohl’s or Macy’s or Home Depot down the street from the stores Sears is closing remain profitable, and it mostly comes down to customer relevance and remarkability.

Second, closing these stores does little to improve profitability. Sears lost $324 million in the first quarter on a 11.9% comparable store sales decline. You cannot possibly show me any math that suggests shuttering these stores will make a dent in those deeply disturbing statistics. Moreover, almost none of the volume lost from these closings will be made up online or in neighboring stores.

Third, as a practical matter, neither Sears nor Kmart is a national retailer anymore, and as they shed volume they deleverage or make inefficient their operating systems. As marketing moves further to digitization and personalization, national scale economics are less important, but they still matter.

The supply chain is highly dependent on scale. Continue to drop volume, and logistics costs as a percentage of revenue go up — or service must be cut, further weakening Sears’ competitive position. Sears has a lot of product that is home delivered. Take volume out of a delivery area, and costs go up or service must go down. As revenues continue to contract, vendors not only become worried about getting paid but also aren’t likely to focus product development and marketing resources on an ever-shrinking chain. It gets harder and harder for Sears to offer anything proprietary or unique in its merchandise assortments.

Fourth, a key point of differentiation for decades has been Sears’ proprietary brands, particularly Kenmore, Craftsman and Diehard. As these products get distribution elsewhere, Sears may generate some incremental cash, but it continues to give customers fewer reasons to shop in its stores or on its captive e-commerce sites.

The simple reality is this: Nothing of any consequence has been done or is being done that will materially reverse the downward trajectory of the company. Closing stores and selling off key elements of the business may slightly improve cash flow, but they further weaken Sears’ and Kmart’s value propositions. Operating losses remain huge with no end in sight. And Sears Holdings is quickly running out of things to raise significant cash.

In an ode to Hemingway, the way Sears will go bankrupt is gradually and then suddenly. Dead brand walking.

838634748_sears-store-750x500

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 June 15 I will be doing a keynote at The Shopper Insights & Retail Activation Conference in Chicago.  For more on my speaking and workshops go here.

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

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.

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

Better is not the same as good for department stores stuck in the middle

As most U.S. department stores reported earnings recently, a certain level of ebullience took hold. Macy’sKohl’s and even Dillard’s, for crying out loud, beat Wall Street expectations, sending their respective shares higher. J.C. Penney, which has failed to gain any real traction despite Sears’ flagging fortunes, continued to disappoint, suggesting that I probably need to revisit my somewhat hopeful perspective from last year. And in the otherworldliness that is the stock market, Nordstrom — the only department store with a truly distinctive value proposition and objectively good results — traded down on its failure to live up to expectations.

Given how beaten down the moderate department store sector has been, a strong quarter or two might seem like cause for celebration–or at least guarded optimism. I beg to differ.

First, we need to remember that the improved performance comes mostly against a backdrop of easy comparisons, an unusually strong holiday season and tight inventory management. There is also likely some material (largely one-time) benefit from the significant number of competitive store closings and aggressive cost reduction programs that most have put in place.

Second, and more importantly, we cannot escape the fact that mid-priced department stores in the U.S. (and frankly, much of the developed world) all continue to suffer from an epidemic of boring. Boring assortments. Boring presentation. Boring real estate. Boring marketing. Boring customer service. And on and on. For the most part, they are all swimming in a sea of sameness at a time when the market continues to bifurcate and it’s increasingly clear that, for many players, it’s death in the middle. It’s nice that some are doing a bit better, but as I pointed out last summer, we should not confuse better with good.

To actually be good — and to offer investors a chance for sustained equity appreciation — a lot more has to happen. And while being less bad may be necessary, it is far from sufficient. Most critically, all of the major players still need to amplify their points of differentiation on virtually all elements of the shopping experience. It’s comparatively simple to close cash-draining stores, root out cost inefficiencies and tweak assortments. It’s another thing entirely to address the fundamental reasons that department stores have been ceding market share to the off-price, value-oriented, fast-fashion and more focused specialty players for more than a decade. And now with apparel and home goods increasingly in Amazon’s growth crosshairs, there has never been a more urgent need to not only to embrace radical improvement, but to really step on the gas.

Without a complete re-imagination of the department store sector — and frankly who even knows what that could actually look like — near-term improvements only pause the segment’s long-term secular decline.

It’s unclear how much the eventual demise of Sears and the inevitable closing of additional locations on the part of other players will benefit those still left standing. It’s unclear whether the current up-cycle in consumer spending will be maintained for more than another quarter or two. What is crystal clear, however, is that incremental improvement in margin and comparable sales growth rates merely a point or two above inflation never makes any of these mid-priced department stores objectively good.

Ultimately, without radical change, it all comes down to clawing back a bit of market share and squeezing out a bit more efficiency in what continues to be a slowly sinking sector riddled with mediocrity. Boring, but true.

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.  

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NOTE: March 19 – 21st I’ll be in Las Vegas for ShopTalk, where I will be moderating a panel on new store design as well as doing a Tweetchat on “Shifting eCommerce Trends & Technologies.”  

A really bad time to be boring · Being Remarkable · Omni-channel · Reinventing Retail · Retail

Upcoming webinar: “Omni-channel is dead. Long live omni-channel.”

Please join me next Wednesday February 14th at 1pm US Eastern for a free 30 minute webinar on the future of omni-channel retailing. I’ll be joined by Rob Poratti from IBM Watson Commerce. You can pre-register here.

In other news, I’ll be heading to Melbourne, Australia at the end of the month for InsideRetailLive.

I’ve also recently added two new keynote speaking gigs, both in Chicago. I’ll be sharing thoughts from my forthcoming book “A Really Bad Time To Be Boring: Reinventing Retail In The Age Of Amazon.”

June 13-15   Shopper Insights & Activation Conference 

November 7-9   eRetailer Summit

For more on my speaking and workshops go here.

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