The two sides of ‘good enough’

It can be quite dangerous to believe that you are better than the competition when the customer evaluates your product offering in isolation and out of context. When I was at Sears our research regularly told us that our target consumers viewed us as the best provider of appliances and tools. Yet we continued to leak market share.

As it turns out, once customers checked out the appliance or tool offering at Home Depot and Lowes they learned that, while the product assortment wasn’t quite as good as ours, the prices were often better. And if they were doing a DIY home improvement project they could get everything they needed in one trip. Plus, having to jump back in the car and deal with the hassle of shopping in the mall added to the “cost” of buying from us. For many customers, at the moment of truth, Home Depot and Lowes were good enough.

The opposite side of good enough involves brands that managed to thrive for many years despite their mediocrity, despite their peddling rather average products for average people.

When consumers had few alternatives, little access to information about their options and weren’t all that demanding, they had little choice but to settle. Those days are rapidly disappearing. Today, in most instances, folks are faced with a virtually infinite amount of choice, information and access. This reality lays bear the deficiencies of any brand for all to see.

Good enough no longer is.

 

Retail’s museums of disappointment

The retail graveyard is already quite full. Sports Authority is on its way there and surely the Sears and Kmart that we used to know can’t be too far behind. They’ll hardly be the last.

In fact, considering the rapid shift in customer behavior and the blistering pace of retail disruption, one could readily argue that far more brands will disappear in the next decade than in the last one.

And it’s not just that brands are going away entirely. Malls, Main Streets, strip and power centers, are already littered with empty boxes, big and small. Some locations quite old and dated, others still bright and shiny, opened a mere few years ago, their carcasses now hollowed out, the result of a merger or, more likely, plain and simple irrelevance.

Maybe we can blame Amazon or the failed economic policies of the Bush administration. Perhaps we can put it all on Obamacare. Maybe some totally unanticipated event came out of left field. Maybe we were just unlucky. Maybe.

More often than not, by the time a brand is buried, there are few who truly will miss it. By the time the final padlock is secured after a store closes, most folks are hardly surprised.

Irrelevance rarely happens overnight. Most often, the brand and their stores have been disappointing customers for years.

Blame Amazon, blame the government, heck, blame Canada (NSFW). Just know that the reality is the symptoms of creeping irrelevance are almost always there if you actually pay attention and if you are willing to act upon what you see and learn.

Whether our stores and malls will become exciting destinations or simply museums of disappointment is, when all is said and done, nine times out of ten, a choice.

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Broadway shouldn’t work

In an age where a virtually infinite amount of entertainment is available whenever, wherever and however we want it–with much of it free or very inexpensive–Broadway just posted its best season ever.

Somehow, despite the inconvenience, despite the high cost, despite the fact that the show will start when it wants, not when you want, millions of people each year still choose to trek to Manhattan, plop their butts in a seat for 2 hours or so and, in the case of Hamilton, often shell out way north of $500.

It shouldn’t work. But it does.

It works because what a great Broadway show offers is unique and scarce.

It works because certain aspects of the experience of seeing a live performance cannot be replicated online.

It works because there is something magical about an immersive happening we get to share with our tribe.

It works because after we’ve been through it we have a remarkable story to tell.

Broadway didn’t have its best year ever because they collectively decided to make what they already offer cheaper and more digitally accessible. They had their best year ever by leaning into what they do that is relevant and remarkable.

The death of physical retail IS greatly exaggerated. But maybe if retailers want to do more than just survive or tread water, Broadway can teach us a thing or two.

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Sears: The one thing that could have saved them

As much fun as it is to call out Eddie Lampert on his misguided, selfish and seemingly delusional decade-plus leadership of Sears Holdings, when the world’s slowest liquidation sale is ultimately complete–I’m guessing, for all intents and purposes, by this time next year–we should acknowledge that Sears fate was probably sealed well over 20 years ago, when Crazy Eddie was not even involved.

First a bit of context. I worked at Sears from 1991-2003 and my last job was head of strategy reporting to then CEO Alan Lacy. I also led the Lands’ End acquisition integration team. During my tenure, in addition to various operating and marketing assignments, I was either the #1 or # 2 strategy guy when we implemented the “Softer Side of Sears”, created and piloted The Great Indoors and Sears Grand concepts and launched or accelerated the growth of free-standing Sears Appliance and Sears Hardware stores. I worked on or led teams that evaluated the acquisition of Kmart, Lowes, Best Buy, Circuit City–and Builder’s Square and Eagle Hardware when they were still around. We also seriously assessed turning all Sears mall locations into home only stores (among other concepts) and, in 2003, analyzed selling Kenmore and Craftsman to Home Depot or Lowes. So it’s safe to say I have more than a passing knowledge of how Sears evolved (or more accurately devolved) over an extended period of time.

With the benefit of that experience (and a good amount of hindsight) my conclusion is this: the only thing that would have given Sears a chance to thrive–not merely survive–was to have either launched their own home improvement warehouse concept or to have acquired Home Depot or Lowes’s at a time when they were realistically affordable–and that’s probably prior to 1995.

The reasons are simple. First, well before Amazon was even a thing it was becoming abundantly clear that the moderate department store space was structurally challenged and that Sears weird mix of hardlines and apparel was not a winning formula. Even if the soft home and apparel business got significantly better that was neither a particularly good nor a sustainable outcome. Second, far and away what Sears had that WAS relevant, remarkable and highly profitable were its appliances and home improvement categories. Importantly, Sears also had several leading market share brands- Kenmore, Craftsman and Diehard–that were only available at Sears.

Yet by the early 90’s it was becoming increasingly clear that Home Depot and Lowes were transforming those categories by winning on more convenient locations, better pricing and the ability to serve a broader set of purchase occasions. As they rolled out their stores Sears share (and profits) in those markets dropped precipitously. And it was also clear–or should have been–that Sears could not mitigate those competitive advantages through its mall-based locations.

So what Sears missed (or more accurately, was unwilling to act on) was that the only way to meaningfully counteract the inevitability of the dominance of the home improvement warehouse (and preserve or grow the value inherent in their proprietary brands and strong customer relationships) was to become a leader in that format. Instead, Sears spent the past 25 years wringing out costs (when it mostly had a revenue problem), vainly trying to grow its off-the-mall presence with too few (and way too mediocre) formats, investing in cool digital stuff while starving their physical stores to the point of irrelevance and embarrassment and, apparently, hoping that the Kardashians could somehow turn around an apparel business that has struggled for more than a decade to consistently get to a 30% gross margin and $100/sf in many stores (or what I like to call the “lame brand instead of name brand” strategy).

To be sure, one can argue that there were any number of things Sears could have done over the past 25 years to have meaningfully altered its course. Certainly had Sears not run its catalog into the ground they would not only have had more money to invest in the core business but would have been beautifully positioned to benefit from the dramatic rise in direct-to-consumer commerce. Without a doubt, virtually all of the new formats that were rolled out could have been much better executed. And some of the fantastic consumer interest created by the Softer Side of Sears campaign was not fulfilled by store and merchandising execution. The Lands’ End deal, while strategically sound and potentially transformative, was botched by a too aggressive store-rollout and mishandled marketing. And on and on.

Of course, we will never know for sure. But ultimately, from where I sit, it would all probably just have been lipstick on the pig.

In my view the real fault lies at the leadership all those many years ago that was too busy diversifying Sears into insurance, real estate and mutual funds, while taking their eye off of the customer and the core business and, thereby, letting Home Depot and Lowes (and to a lesser degree Best Buy) gain an insurmountable lead. And that’s a real shame, not to mention a heartbreaking disservice to all those men and women who worked so hard to make Sears a retail icon.

Dead brand walking.

 

 

The hardest to learn is the least complicated

Gentle reader, congratulations on your wise choice. It is indeed your good fortune to have chosen to read my blog today for I am about to reveal a short-list of virtually guaranteed ways for you to be successful in both your professional career and your personal life.

Intrigued? I bet.

Ready? Let’s do this.

Steve’s virtually sure-fire ways to be successful in business:

  1. Focus relentlessly on the customer.
  2. Never engage in a price war you can’t win.
  3. Defy the sea of sameness and find your purple cow.
  4. Treat different customers differently.
  5. Reject the cult of busy.
  6. Don’t be afraid to fail. Fail better.

Steve’s virtually sure-fire ways to be successful in your personal life:

  1. Accept the things you cannot change.
  2. Live in the now; be present and mindful in all you do.
  3. Be kind whenever possible. It is always possible.
  4. Don’t take things personally.
  5. Remember the things for which you are grateful.
  6. Live open-heartedly and with compassion.
  7. Embrace vulnerability.

As a reader of this blog you have already revealed yourself to be a person of great intelligence and discernment, so you have likely already concluded that these ideas– collectively and individually–are both true and useful. More importantly, you probably noticed that they are all conceptually rather simple to comprehend.

So why do we struggle to put them into practice?

The first reason is our habits. If you are anything like me, you’ve been been conditioned to strive for perfection, to associate your self-worth with your job, your busyness and your possessions. Perhaps you’ve also been taught that vulnerability is weakness or that you’re not okay unless the people around you are okay or that it is your job to figure things out without the help of others. These are all rather obvious and destructive lies, yet our negative practice has created deep grooves in our psyche. The only antidote is to develop different habits and practice them until new grooves are formed.

The understanding is not the hard part. It’s the un-doing.

The second reason is our choices. I’ve watched myself (and more than a few friends, colleagues and loved ones) decide to stay stuck in the past, fight things I couldn’t change, drink the poison of resentment, bask in the misguided attention of victimhood and generally engage in far too much ego grasping and not enough letting go.

Again the understanding is not the hard part. It’s the acceptance that every day we start clean slated and I (and you my dear friend) get the chance to make a new set of choices. Our task is to choose wisely and to rinse and repeat.

The wolf we feed is the one that wins.

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h/t to the Indigo Girls for the title inspiration.

I’m going to build a wall and I’m going to get Amazon to pay for it

As I sift through recent retailer earnings reports and reflect on the various (largely excellent) sessions I’ve attended at the inaugural ShopTalk conference in Las Vegas, it’s impossible to ignore the elephant in the room. That elephant is, of course, named Amazon.

Story after story–presenters and panelists alike–are quick to remind us of Amazon’s tremendous growth, the staggeringly large percentage of online revenue they account for and the dampening effect their strategy has on pricing, store traffic and other measures of competitiveness.

Apparently it sucks to be us.

So unless we want to totally ignore this harsh reality, we have a couple of decisions to make.

The first is to decide whether we will accept it and focus instead on the things we can change. From where I sit, I see way too many brands knee-deep in denial and choosing a path that involves a lot of whining. Ugh, so much whining.

The second decision is whether we will try to out-Amazon Amazon. There is plenty of advice on how to counter the Amazon effect. Most of it is terrible.

It’s terrible because it suggests that retailers with higher costs than Amazon can possibly win a price war. It’s terrible because it pre-supposes that merely offering free shipping or “buy online pick-up in store” is enough to counter Amazon’s dominance in product assortment and delivery convenience. It’s terrible because it’s based on a hope that Amazon will follow the same profit and investment calculations that long-established retailers do. It’s terrible because even if some of these efforts manage to gain some traction it presumes Amazon won’t respond aggressively or find some other way to grab market share in their areas of focus.

So, in virtually all cases, the decision to take on Amazon directly is a decision to lose. It’s a decision to invest a lot of time, resources and energy in the vain hope that it will work for you and hurt them. It’s a decision to set a pile of money on fire.

The only decision then is to double down on (or lean into) those things that make your brand more relevant, more remarkable, more sustainable and more profitable.

For retailers that still garner most of their sales from their physical stores that means appreciating and nurturing the unique advantages of brick & mortar locations: personal service, product presentation, merchandise curation, social experiences, instant gratification and the like. It’s about complementing the in-store experience with a well integrated online offering. It’s about understanding how digital (and, increasingly, mobile in particular) is the new front-door for your brand and working to make that experience as compelling and customer-centric as possible.

It is possible that your business may shrink in the process? It is. Is it possible that you will get a lot of heat on why you aren’t taking on Amazon more directly? Of course. It’s also possible you will be a hell of a lot more profitable than the path you are currently on. You also stand a far better chance of being in a business a few years from now.

You aren’t going to build a wall and get Amazon to pay for it.

 

 

 

 

An audience or a customer base?

As we become more data-driven having an accurate, complete and actionable customer database is certainly worthwhile. Of course many brands struggle even to get the basics of this right. And that’s a problem.

Yet even when we get this mostly right simply having someone in our database isn’t necessarily all that useful. Many people we label “customers” haven’t bought in quite some time and often we have no idea why that is. Others aren’t the least bit loyal, only buying when we give them an incredible deal. Still others prefer us for only one specific thing and the potential to grow share of wallet with them is nil. Chances are there are also quite a few names in our file that were acquired through some gimmicky email promotion and those folks actual interest in our brand is non-existent. And that’s a bigger problem.

Contrast that with an audience.

Audiences actively follow what we’re up to. We’ve earned their share of attention. They eagerly await our next release. They quite willingly sign up to hear from us. They share our interesting stuff with their friends. They are engaged, not passive. Sometimes they even sing-along.

Ideally, the size of our audience is not so big that we dilute the possibility of sustained relevance, nor so small that it borders on meaningless. Done intentionally and with care, it’s just right.

Could it be we’re spending too much time building our databases and not enough time curating and growing an audience?

 

h/t to Austin Kleon for the continued inspiration.