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.

It’s easy to vote ‘no’

“Fear is a natural reaction to moving closer to the truth.” ~Pema Chodron

It’s rarely the case that organizations utterly lack new ideas or things to try. They just get voted down most of the time.

Many of us when confronted with change are quick to find fault with moving ahead. It might not work. We could look foolish. It just makes me uncomfortable. Maybe I’ll get fired. Best to just say ‘no.’

Most of us are filled with “should’s.” I should finish that novel or start that business. I should speak up more. I should finally make that trip. I should deal with the unfinished business with my family. And on and on. But our fear keeps us stuck and ‘no’ is all too often the seemingly safe choice.

Voting ‘yes’ more often isn’t the path of least resistance and it is far from a guarantee of success. Not everyone will get it, few may have your back and others might shun you entirely.

Stay the course. Be vulnerable. Chase remarkable.

Going out on a limb is where we’re needed, where we’re called to be, where the magic happens.

And your vote counts.

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Coffee is for closers

Coffee may be for closers, but that’s about all the rewarding we should do. The relentless focus on transactions, conversion rates and closing statistics is well past its expiration date.

Sure you could get married on a first date, but I’ll wager that’s not the best idea.

Today the shift must be toward building relationships–and that starts with earning attention and establishing trust, not making a quick deal.

In a new model of retail KPIs we start first with awareness, which is mostly about breaking through the noise and achieving share of attention. We then focus on engagement that is intensely relevant and remarkable in the truest sense of that word. And we accept that one transaction doesn’t count for much, particularly if it’s achieved through uneconomic and unsustainable discounting. What does matter is continued engagement and interaction that, overtime, leads to loyalty (not mere frequency) and brand advocacy.

Brands that adopt this mindset and plan of action will be far better positioned for a digital-first, customer-in-charge world.

For everyone else, well, enjoy the steak knives.

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Shut up and play the hits

Maybe you’ve been to the famous comedian’s show where by far the biggest laughs come from the bits you’ve already seen him do on Fallon. And Kimmel. And YouTube. And his five year old Netflix special.

Maybe you’ve excitedly gone to hear that marketing guru at a big industry conference and grown weary and uninterested when she begins by talking about her just released book, you know, the one you haven’t read. But you instantly light up again when she starts to riff on the ideas from a decade old tome that formed the basis of her TED talk that you’ve watched a half dozen times.

Maybe you’ve attended a concert by an iconic rock band and became impatient with the lead singer’s extended stage patter. And then as soon as they start to play the new stuff–or maybe some deep track from a classic album you’ve always skipped past–you know that’s your signal to head to the rest room or go grab a beer.

For any kind of artist–and we’re all artists now–it’s a whole lot easier to go for the well-tested laugh line, crank up the guaranteed crowd pleaser or simply default to the thing that made you popular (or at least accepted) in the first place. As it turns out, most of us like safety and there is safety in the familiar.

Organizations and brands aren’t a whole lot different. Most non-profits turn again and again to golf tournaments and galas to raise money. In the CPG  world, the core strategy is to churn out seemingly endless iterations of best sellers. And just about every retailer goes back to the well over and over again with minor tweaks to long-standing merchandising and marketing practices.

Yet the evidence is clear. Eventually we grow tired of the greatest hits. What worked well for so long, no longer does. And with more and more art and content and ideas and disruption being produced literally by the second–accessible to nearly everybody at any time, anywhere–what once seemed remarkable is anything but.

Is there an audience who only wants regurgitated versions of what you or your organization has always done, who can’t possibly accept new material, who has no interest in being challenged? Perhaps.

Is that the audience that is going to get you to where you need to be?

 

Pema Nest

 

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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