Being Remarkable · e-commerce · Growth · The Amazon Effect

With Kenmore Deal Amazon Is A Winner. For Sears, Not So Much.

Investors reacted quite favorably to the news that Kenmore appliances will soon be sold through Amazon. For Amazon, it’s clearly an interesting opportunity. While online sales of major appliances are currently comparatively small, being able to offer a leading brand on a semi-exclusive basis gives Amazon a jump start in a large category where they have virtually no presence. On the other hand, for Sears, it smacks of desperation.

First, some context. Way back in 2003 I was Sears’ VP of Strategy and my team was exploring options for our major private brands. Despite years of dominance in appliances and tools, our position was eroding. Our analysis clearly showed that not only would we continue to lose share (and profitability) to Home Depot, Lowe’s and Best Buy, but those declines would accelerate without dramatic action. Unfortunately, it was also clear that very little could be done within our mostly mall-based stores to respond to shifting consumer preferences and the growing store footprints of our competitors. Kenmore, Craftsman and Diehard’s deteriorating positions were fundamentally distribution problems.  And to make a long story a bit shorter, a number of recommendations were made, none of which were implemented in any significant way.

Flash forward to today, and Sears leadership in appliances and tools is gone. While in the interim some minor distribution expansion occurred, it was not material enough to offset traffic declines in Sears stores and the shuttering of hundreds of locations. More important is the fact that Kenmore and Craftsman still aren’t sold in the channels where consumers prefer to shop–and that train has left the station.

So last week’s announcement does expand distribution, but it does little, if anything, to fundamentally alter the course that Sears is on. Simply stated, making Kenmore available on Amazon will not generate enough volume to offset continuing sales declines in core Sears outlets, particularly as more store closings are surely on the horizon. Selling Kenmore on Amazon does not in any way make Sears a more relevant brand for US consumers. In fact, it will give many folks one more reason not to traffic a Sears store or sears.com.

Since 2013 I have referred to Sears as “the world’s slowest liquidation sale”, owing to Eddie Lampert’s failure to execute anything that looks remotely like a going-concern turnaround strategy, while he does yeoman’s work jettisoning valuable assets to offset massive operating losses. Earlier this year, Sears fetched $900 million by selling the Craftsman brand to Stanley Black & Decker, one of the leading manufacturers and marketers of hand and power tools. So it’s hard to imagine that Sears did not try to do a similar deal with either a manufacturer of appliances (e.g. Whirlpool or GE) or one of the now leading appliance retailers. The Kenmore partnership with Amazon appears to have far less value than the Craftsman deal, despite being done just six months later–which speaks volumes to how far Sears has fallen and for how weak Sears’ bargaining position has become.

The cash flow from the Amazon transaction will do little to mitigate Sears operating losses and downward trajectory. In fact, it seems to be mostly the best way, under desperate circumstances, to extract the remaining value of the Kenmore brand given that no high dollar suitors emerged and Sears continues its march toward oblivion. Amazon, however, is able to take advantage of fire-sale pricing and create the valuable option to have Kenmore as a potentially powerful future private brand to build its presence in the home category.

Advantage Bezos.

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

Being Remarkable · Inspiration · Leadership

Nobody should care how much golf we play

Or how many cakes we bake, how much TV we watch, how often we go to the gym or whatever happens to floats our boats or simply pass the time, so long as…

…we honor our most important commitments…

…our words match out actions…

…we take responsibility for our stuff and stay on our side of the street…

…we act instead of complain…

…we are in the arena, instead of watching and judging from the stands.

It turns out individuals, organizations and brands get cut a fair amount of slack and earn many degrees of freedom when they do the work, eschew hypocrisy and can be trusted to show up when it counts the most.

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Being Remarkable · Innovation · Inspiration · Leadership

The next hill

How many times have we said that we want innovation, change, growth, maybe even a revolution?

Sometimes we express these hopes and desires for our organization or society writ large. Sometimes our intention is directed squarely at ourselves. Whatever the case, too often we talk a good game but actually do very little.

Fear is one problem. Anything truly worth doing involves risks. And putting ourselves out there, sharing our ideas, committing to make a real difference, doing the hard, uncomfortable work, can be scary. Of course much of this is pure imagination. As Mark Twain reminds us: “I’ve lived through some terrible things in my life, some of which actually happened.”

The other problem is we greatly overestimate our ability to understand the future. And too often we think that our actions will lead to an easily predictable outcome. Too often we believe that with enough planning and analysis we can control the way forward. Too often without a clear view of all the steps to success we don’t even take the first one. Our illusion of control and our flawed gift of prophecy all contribute to our stuck-ness.

Having a precise map for our next road trip is a solid idea. But being attached to that notion for journeys of innovation and profound change is worthless. The way forward for personal and organizational transformation is fraught with twists and turns, ebbs and flows, peaks and valleys. The moment we believe that before we can begin we need to be able to see our way clear to the end is the moment paralysis starts to set in.

Along our path, personal or otherwise, we will be climbing a series of hills. When we reach the top of each hill more will be revealed. What we couldn’t see from the base will now lay before us. We will have the lessons from our trek. We will have a clearer view of the landscape ahead. We will have the confidence gained from having successfully completed our hike.

It’s only complicated if we make it so.

Get pointed in the right direction.

Start moving.

Just make it to the next hill.

Recalibrate.

Rinse and repeat.

Being Remarkable · Leadership · Loyalty Marketing

Demanding loyalty

It seems rather natural to want loyalty. Maybe sometimes we even crave it or desperately feel as if we need it. From our employees. From our customers. From our friends or partner.

But as the boss, we shouldn’t think we have loyalty when conformance with our agenda–or praise from a parade of sycophants–is engendered out of fear of humiliation or termination.

As brand leaders, we shouldn’t claim we have loyal customers when the primary reason they buy our product is because we bribe them with endless discounts.

As someone in a personal relationship, we might deservedly expect loyalty, but if we only feel it exists when we threaten negative consequences we are merely kidding ourselves.

Loyalty is an emotion. And when deeply felt it can lead to our getting what we desire.

Loyalty is earned. Over time, through remarkable, relevant and consistent actions that build trust.

Demand loyalty all you want. If you aren’t getting it, don’t waste your time blaming your employees, customers or loved ones.

Our work is to get real, get accountable, and yes, get vulnerable. Loyalty is available to those that do the work and earn it.

 

Amplify · Being Remarkable · Story Telling

Your customers aren’t buying your products

I don’t mean your customers are no longer buying your products. Because if they aren’t buying from you anymore they are no longer customers. And that’s a different blog post.

I mean the main reason your customers bought from you in the first place–and the reason they continue to buy from you–isn’t because you have the best products. In fact, the retail industry’s relentless and nearly single-minded focus on product is the main reason so many retailers are in trouble. So-called “merchant prince” Mickey Drexler of J. Crew finally admitted this.

But it’s always been true. People buy the story before they buy the product. And they continue to carry our handbag, wear the hat with the swoosh, come to our restaurant or wait in line for the next version of our stuff because of how they feel when they experience our product or service. And that goes way beyond the objective, rational superiority of our features and benefits.

While I am hardly the first person to make this point, every time I make it I invariably get challenged on my lack of merchandising skill (guilty) or how I just can’t see how critical good product is. If these people only drink tap water I tend to listen a bit more carefully. But that doesn’t make them right.

Here’s the thing. I’ve never said product is unimportant. But when we confuse necessary with sufficient, we are on our way to making some big mistakes.

Brand success is most often determined at the intersection of desire and scarcity. You may sell what I want (or need), but if it isn’t special I’m not buying it (or I’m only buying it from you because you have the lowest price).

For most customers, in most categories, good product is far from scarce. A truly remarkable experience, a feeling that move us and that we are compelled to tell others about? Well that is very much in short supply.

Perhaps you DO need to improve your products. But if I were a betting person, I’d wager you also need to tell a better story.

It matters which you choose to prioritize.

Being Remarkable · Innovation · Retail

Macy’s: After Big Earnings Whiff, Here’s What It Needs To Do

Last week Macy’s missed its revenue and earnings forecast for the first quarter, sending its shares tumbling.

While the talk of a retail apocalypse is just so much hype, the intense waves of digital disruption and shifting consumer preferences assure that the future of retail–and the impact on many large and lumbering players like Macy’s–will not be evenly distributed.

We now live in a digital-first world where the line between brick & mortar sales and e-commerce is mostly a distinction without a difference. Fellow retail analyst Doug Stephens describes this new landscape as “phygital.” But whatever you label it, the consumer’s path to purchase has changed substantially–and with it the role of the store. And, increasingly, same-store sales are a largely irrelevant metric.

Nevertheless, the continuing overall poor performance of Macy’s is concerning and underscores the problems faced by many legacy brands. To get back on track, Macy’s needs to aggressively address several fundamental problems.

  • Eschew the sea of sameness. Macy’s, like so many other retailers, picked a really bad time to be so boring. Redundant, repetitive and fundamentally uninteresting product has become the norm. If customers don’t have a compelling reason (other than price) to traffic either their website or store, Macy’s will continue to hemorrhage market share.
  • It’s the experience stupid! Having remarkable and relevant products is critically important and a necessary foundation, but it’s hardly sufficient. If Macy’s continues to provide me-too visual presentation, marketing that is indistinguishable from every other department store and lackluster customer service they will continue to make price the deciding factor for most consumers.
  • Omni-channel is dead, at least in the way many have been pursuing it. Macy’s spent a lot of time and money trying to be all things to all people. Channel ubiquity with continued mediocrity is pointless. All retailers need to think about how to best harmonize and simplify the shopping across the moments of truth that matter the most for customers. Otherwise we’re just spending a lot of money to move customers between channels, not gaining relevance, share of wallet and profits.
  • Strategically re-imagine the store and the store footprint. Analysts are going to keep pushing Macy’s to close stores. And to be sure, shrinking of both store counts and store size is probably required. But the reason this is even a talking point has much more to do with the weakness of Macy’s value proposition, not their sheer number of stores. Online helps stores and stores help online. Period. Mediocre retailers that close a lot of stores are likely starting a downward spiral from which they will never return. The key is to understand the store as the hub of an ecosystem for the brand, not an asset to be merely fine-tuned for productivity. Focus on being remarkable instead of mediocre and focus on how stores strategically drive online (and vice versa) and the store closing discussion recedes into the background.
  • Don’t start a price war. With pricing pressures from Amazon, outlet stores and all the off-price players there might be a tendency to get overly focused on pricing. But don’t forget, the problem with a price war is you might win.
  • Become a testing machine. It’s easy to blame Amazon for the troubles facing the industry. But by far the biggest reason retailers are in trouble is their abject failure to innovate. Every retailer needs an R&D budget and every retailer needs to test, fail and test again. Retailers were too scared to fail and now their failing because of it. As Seth reminds us “if failure is not an option, than neither is success.”

Of course all of this is more easily said than done, particularly as Wall Street pushes for short-term fixes and Amazon continues to lower its thin margin hammer on most sectors of retail. Yet it’s hard to escape the fact that more of the same at Macy’s will only yield more of the same.

What Macy’s needs is a lot more innovation.

What investors need is just a bit more patience.

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

Being Remarkable · Innovation · Retail

Retailers picked a really bad time to be so boring

Perhaps you’ve noticed that things are pretty tough across the retail industry these days?

Competition has never been more fierce. Average unit retail prices are getting compressed, putting ever greater downward pressure on margins. Retailers and developers that overbuilt for years are at long last facing a reckoning. Radical transparency and ease of anytime, anywhere, anyway shopping are hammering those that have failed to innovate and differentiate.

Of course, not so long ago retail brands could get away peddling average products for average people. There was a time when retailers and the brands they sold held most of the cards. There was a time when rapid industry growth could smooth over patches of mediocrity. There was a time when being just a little bit interesting could win the customer’s attention and give retailers a good shot at making the sale.

That time is over. Forever.

Now the customer is very much in charge. Now largely stagnant markets require brands to steal share to have any chance of material top line growth. Now much of retail is drowning in a sea of sameness. Now the consumer is overwhelmed by choices and the battle for share of attention is only won by the weird, the intensely relevant, the remarkable.

And yet….

And yet when entrepreneurs chased force multiplication effectiveness, many legacy brands chose to focus on incremental efficiency gains. While innovative start-ups took risks, the big retailers mostly hunkered down. As a wave of profound change was rippling through the industry, many just decided to watch and study and analyze. But mostly watch. When venture capital was piling into the bold and interesting, much of mainstream retail remained decidedly dull.

There is no shortage of unique, impactful and useful innovations that have emerged from the new age of digital disruption. It’s just that so little of it has come from traditional retailers. At precisely the time that so many retailers desperately need innovation, their cupboards are woefully bare. Confronted by me-too marketing, look-a-like stores, repetitive products and shoddy customer experiences, so many once-proud brands still have next to nothing new, differentiated and exciting to offer.

Today you can take the name off the door and Staples, Office Depot and Office Max are virtually indistinguishable. Same for Macy’s and Dillard’s, Lowe’s and Home Depot. And on and on.

The danger of death by years of inaction, thousands of tiny compromises and clinging to the false notion that a company can shrink to prosperity is now very real. Half measures have availed them nothing. Taking so few risks has turned out to be the riskiest thing retailers could have possibly chosen.

In fact, it’s hard to imagine a worse time to be so boring.

And, ironically, many of these retailers are about to experience a lot of excitement. Just not the fun kind.

Now isn’t that special?

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

Being Remarkable · Digital · e-commerce · Frictionless commerce

Retail at the precipice

Some have called it the retail apocalypse. Others refer to it the great retail meltdown. And while hyperbole is the best thing ever, these pronouncements serve as better clickbait than sound analyses. Worse, it makes it sound like every retailer is struggling and that physical retail is doomed.

Nevertheless, it’s hard to ignore the dramatic rise in store closings, job losses, bankruptcies and complete liquidations. It’s harder still to dismiss the wave of disruption that is shaking most traditional retailers to their core. The overbuilding of space is finally catching up to most sectors. The radical shift of spending online is creating a great deleveraging of physical retail. Consumer preferences are tilting to more experience, less stuff and a growing reluctance to pay full-price or spend conspicuously. Most damaging, the majority of “old school” retailers have not made innovation a priority and are now forced to play catch up at precisely the time they lack the cash to do so. And, sadly, for some retailers, it is too late.

Much of retail now finds itself at a precipice, a crossroads, the proverbial tipping point. In many cases, the decisions that will get made in the months ahead will make or break a scary number of major brands. Let’s look at four things that retailers that find themselves at or approaching the precipice need to focus upon and get right.

Should I stay or should I go? 

Major retailers have already announced nearly 3,000 store closings since the beginning of the year and more are on the way. But, to paraphrase Mark Twain, reports of physical retail’s death are greatly exaggerated. With some 90% of all retail still done in brick-and-mortar locations, physical retail needs to be different but it is not going away. There is great pressure on retailers to take an ax to their store counts, but this must be done judiciously. Careful rationalization of both store counts and remaining store footprints can enhance retailer relevance and profitability. But there is a real danger of closing too many stores. Deep analysis of network effects and cross-channel shopping behavior is needed to get this right.

The fault in our stores. 

With the rise of e-commerce and the over-storing of America, consolidation was inevitable. Despite most retailers’ best efforts, highly disruptive business models like Amazon were certain to gobble up share. But much of what ails retail is self-inflicted and most of what is causing heartache today could be seen coming for more than a decade. Retailer’s organizational silos get in the way of delivering an experience that is unified across channels and touch points. Traditional players’ reluctance to move away from one-size-fits-all marketing strategies fail to make the shopping experience more personalized. Retailer’s focus on efficiency rather than effectiveness stands in the way of a more simplified shopping experience and one that is more localized. And most brand’s risk aversion leads to a sea of sameness rather than an experience that is amplified in its relevance and remarkability.

Winning the moments that matter.

Since the vast majority of shopping journeys now begin online, which often means on a mobile device, a brand needs to be both present and impactful in what Google calls micro-moments (full disclosure: Google has been a client of mine) and what I have come to call “marketing’s new power of now.” Having a great product and cool advertising is necessary, but far from sufficient in a digital-first world where the first battle to win is the war for attention. If retailers don’t show up consistently in the moments that matter with an intensely relevant, remarkable and actionable offering, it’s likely game over.

Failure IS an option.

I headed up strategy at two Fortune 500 size retailers and in both assignments I tried to convince the CEO to establish an innovation process and to create an R&D budget. In both cases we said we wanted to be more innovative and in both cases we ultimately did nothing to meaningfully foster innovation. In fact, during one attempt to pitch a new idea to one of these CEO’s he said to me: “Steve I’m supportive of what you are trying to do but we need to this in such a way that we can’t fail.” At that point I was reminded of what Seth Godin says: “If failure is not an option, then neither is success.” I was also reminded it was time to update my resume. Spoiler alert: both retailers got into trouble due to their lack of innovation. Since becoming a consultant, writer and speaker on innovation I’ve seen how very few established retailers have taken innovation seriously. They are all paying a big price for that right now.

Retail isn’t getting any easier. In fact, one could argue that the pace of change is accelerating. And few of the issues plaguing retail are easily solved. But a few things seem certain. Defending the status quo is a recipe for disaster. If you believe you can shrink your way to prosperity, think again. Innovate or die. Your mileage may vary.

In today’s harsh retail world, a fair amount of pain is probably inevitable. The degree of suffering remains optional.

A version of this story recently 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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Being Remarkable · Innovation · Leadership

Yeah, but what if we don’t?

All too often we can find ourselves ruled by fear, both subtle and profound. Faced with going out on a limb, being vulnerable, trying something entirely new, it’s easy for The Resistance to take over, for the lizard brain to kick in, for us to tell ourselves the time isn’t right or that we aren’t quite ready.

For many us, it’s not the least bit difficult to imagine the embarrassment, pain or all manner of calamities that might result from exposing our ideas to the world, starting our own new business, choosing to be the one to stand up to injustice, aggressively pushing our organizations to innovate or embarking on just about any endeavor that is fraught with risk.

I’m reminded of what Mark Twain supposedly said: “there has been much tragedy in my life, some of which actually happened.”

It turns out we humans seem to be rather good at naming and feeling the risk of doing something, but maybe not so good at seeing the reward. We ask ourselves the “what if we do?” question and then frequently talk ourselves into stopping, waiting or hoping someone else will act instead.

Yet when it comes to pondering the work that matters perhaps a better question would be “what if we don’t?”

If we don’t innovate, our organization or business might not only stagnate, it might cease to exist entirely.

If we don’t speak up against hate, we enable injustice to spread unchallenged.

If we don’t vote, we get leaders that are at best clueless; at worst dangerous.

If we don’t act to unleash our potential, our desire, our creativity we, to paraphrase Thoreau, can easily fall into the trap of living lives of quiet desperation and go to our graves with the song still in us.

Too often we think the risk is in acting, when it is precisely the opposite.

Too often we believe we have more time, when in fact it’s much later than we think.

Too often we find ourselves asking the wrong question entirely.

 

 

Being Remarkable · Customer experience · Digital · e-commerce · Frictionless commerce · Omni-channel

Omni-channel is dead. Long live omni-channel 

“Omni-channel” has been one of retail’s favorite buzzwords for years now. At last week’s excellent ShopTalk conference, several speakers challenged the relevance of omni-channel. This conversation is long overdue.

The shift from a “multichannel” strategy–being active in multiple channels such as physical stores, catalogs and e-commerce–to omni-channel, suggested some form of profound change. It created a veritable cottage industry in related buzzphrases like “seamless integration,” “frictionless commerce” and “being channel agnostic.” To be honest, I’ve been known to throw some of these terms around in blog posts and keynote talks with reckless abandon.

Yet five years or so into this journey, it’s increasingly obvious that omni-channel isn’t all it’s cracked up to be. Many of the retailers at the forefront of omni-channel evangelism–Macy’s being the most glaring example–have only delivered quarter after quarter of disappointing performance. Many struggling retailers have problems that go far beyond merely drinking the omni-channel Kool-Aid. But the fascination with, and massive investment in, all things omni, have in many cases made matters far worse. A recalibration is needed. Perhaps the term needs to be buried.

The first problem is that retailers have been chasing ubiquity when they need to be chasing relevance and differentiation. Clearly, customers are engaging in more channels as part of their shopping journeys and retailers must respond accordingly. But in trying to be everywhere many brands have ended up being nowhere when it comes to a compelling offering. Undifferentiated product, less than remarkable customer service and uncompetitive pricing aren’t helped by extending their reach.

The second problem stems from investing in e-commerce and digital marketing with insufficient focus and prioritization. The majority of retail purchases in virtually all categories start online and, despite conventional wisdom, digitally influenced physical store sales are far bigger than online sales. Many traditional retailers made their e-commerce offering better while underinvesting in their physical stores, seeming to forget that the lion’s share of shopping is still done in brick & mortar locations. Not every aspect of e-commerce or embracing a “digital-first” strategy is important.

The third problem is that a lot of e-commerce remains unprofitable and many digitally-based customer acquisition strategies are uneconomic. The future of omni-channel will not be evenly distributed. Retailers need to have a well-sequenced roadmap of digital marketing and channel integration initiatives rooted in a deep understanding of customer behavior and underlying economics. Too much of what has been done thus far has been more shotgun, rather than laser-sighted rifle, in its approach, and the generally poor results illustrate this quite dramatically.

The fourth problem is somehow thinking that customers care about channels. Customers care about experiences, about solutions, about shopping with ease and simplicity. At the risk of advocating yet another buzzphrase, “unified commerce” is far more descriptive of what needs to happen than “omni-channel.” “All channels” never suggested a meaningful consumer benefit. And it never will.

Of course, engaging in semantic arguments doesn’t ultimately accomplish very much. But neither does continuing to plow mindlessly ahead, chasing a once bright and shiny object that is rapidly losing its luster.

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