Slow motion crises

In the world of retail it’s pretty rare that brands get into trouble over night–much less over a matter of months or even years.

What will turn out to be the deathblow for Sears started with Walmart in the 1980’s, and was followed by Home Depot, Lowes and Best Buy chipping away at Sears core tools and appliance business as these insurgents opened new stores and improved their offerings over many, many years.

The ability to deliver books, music and other forms of entertainment digitally (or shipped directly to the consumer) just didn’t pop up one day. Blockbuster, Borders and Barnes & Noble had years to respond. They just didn’t in any especially powerful way.

Starbucks initiated its rapid store growth more than 20 years ago. And the broader reinvention of the retail coffee business by local independents, along with forays by Keurig, Nespresso and others, is hardly a recent phenomenon. Yet it’s hard to point to anything particularly innovative that industry leaders Folger’s and Maxwell House have done during this extended period, despite their brands continuing to lose sales and relevance.

As Macy’s, JC Penney, Dillards and other traditional department store players garner lots of negative press about their current struggles, we should remember that the department store sector has lost relative market share for more than two decades. Their problems are not simply a function of the growth of e-commerce. And even if they were, the best in class players were investing heavily in e-commerce–think Neiman Marcus and Nordstrom–more than 15 years ago.

Crises created by unforeseen events are one thing. Slow motion crises only reveal that we took our eyes off the ball, were too afraid to act or both.

The way to avoid a retail slow motion crisis is as follows:

  • Understand where customer value is being created on a go forward basis
  • Dissect your most valuable customer segments to understand where your brand is vulnerable and where you have potential leverage
  • Figure out where you can compete by modifying your core business and where you need to innovate outside of your core
  • Don’t be afraid to compete with yourself
  • Consider acquistions as way to build new capabilities quickly
  • Embrace a culture of experimentation
  • Spend more time doing, than studying.

 

 

 

 

The bullet’s already been fired 

I’m fascinated by our capacity to get stuck, the many ways we craft a narrative in a vain attempt to avoid change, the stories we buy into as we hope to keep above the fray. Far too often, the power of denial seems endemic to individuals and organizations alike.

Go back to the 80’s and 90’s and ponder how a slew of successful retailers mostly did nothing while Walmart, Home Depot, Best Buy–and a host of innovative discount mass merchandisers and category killers–moved across the country opening new stores and evolving their concepts to completely redefine industry segments. Somehow it took many years for the old regime to realize what was going on and how much market share was being shed. For many, any acceptance and action came far too late (RIP, Caldor, Montgomery Ward, et al).

Witness how digital delivery of books, music and other forms of entertainment came into prominence while Blockbuster, Borders and Barnes & Noble spent years mostly doing nothing of any consequence. Two of them are now gone and one is holding on for dear life.

Starbucks revolution of the coffee business hardly occurred overnight. But if you were the brand manager of Folger’s or Maxwell House you apparently were caught unawares.

Consider how consumer behavior has been shifting strongly toward online shopping and the utilization of shopping data through digital channels for well over a decade. Yet many companies are seemingly just now waking up to this reality. And by the way, Amazon didn’t just spring out of nowhere. They will celebrate their 22nd anniversary this summer.

And lastly, examine how the elite players of the luxury industry have largely resisted embracing e-commerce–and most things digital–believing that somehow they were immune to the inexorable forces of consumer desires and preferences. Apparently they failed to notice, as just one example, Neiman Marcus’ rise to having 30% of their sales come from online and more than 60% of physical store sales now being influenced by digital channels.

More often than we care to admit, the bullet’s been fired, it just hasn’t hit us yet.

The good news is that while the pace of change is increasing in retail, we have a lot more time to react than we do in a gunfight.

The bad news is that the impact can be just as deadly if we are not prepared.

 

 

The upside of denial

Is there any?

If your experience is anything like mine, you know how seductive denial can be. Denial is the temptress that helps us avoid pain. Denial keeps us in our comfort zone like a warm bath at the end of a long day. Denial creates the sense that defending the status quo is working or that we can go around our problems rather than through them.

But mostly it creates an illusion of safety when the reality is anything but. It works incredibly well–until it doesn’t.

Denial is cunning and baffling. It’s the monster lurking beneath the surface, hiding in the closet and buried in the chatter of our monkey mind.

In a business setting, denial allows us to trumpet our booming customer acquisition statistics, while ignoring the other engagement metrics that are falling apart. It causes us to crow about our rapidly growing e-commerce business, while the reality is that it’s entirely channel shift. It’s the glowing press release, the clever Powerpoint, the rah-rah company-wide meeting or the slick investor presentation that contains all the right buzz-words, when everyone else knows it’s the proverbial lipstick on the pig.

Denial kept Sears from ever really dealing with Home Depot and Lowe’s. It kept Blockbuster and Borders from confronting digital. And on and on.

Too often denial feels like our friend, when in fact it is every inch our enemy.

As David Pell humorously reminds us: “Among the dinosaurs, there were many asteroid deniers.”

The world’s best growth hack

We spend so much time, energy and money searching for new customers. Yet, in case you haven’t noticed, in many cases acquisition costs are rising–often substantially–and often to the point where these efforts are cash negative.

Once we’ve acquired a new customer, we hit them with an never-ending stream of emails, free shipping offers and the like to increase shopping frequency or build order value. Unfortunately, if you actually do the math, a lot of these tactics are unprofitable or unsustainable.

We chase new store openings, product line extensions and the latest bright and shiny item like Donald Trump looking for the next person to insult. To what end?

Sadly, when it comes to the search for growth, far too many brands are doing it wrong. For most relatively mature companies, the best growth hack is retention.

If you don’t know your churn rate and how many dollars you lost to lapsed customers last year, go find out.

If you don’t know the reasons why they left, I suggest you get focused and get busy.

If you don’t whether they were worth saving in the first place, sounds like you have some work to do. The good news is the work is well worth doing.

And, going forward, make sure you distinguish between a hack and the hackneyed.

A place to buy things

What do your customers really think of you?

Do they have a compelling story to tell about your brand? Have they had experiences that deeply resonate with them? Do they proactively advocate on your behalf? Can they easily justify the premium they choose to pay? Would they give you another chance if you screwed up?

Or, when it comes down to it, in their minds and hearts, you’re merely a place to buy things?

And when there’s a slightly better price–or a marginally more convenient option–they jump at the opportunity, without a trace of regret.

Pure unicorn dust

Do you know companies that say they are all about growth and innovation, yet completely lack any semblance of a process or a modicum of dedicated funding and resources to support these efforts? Do they even possess a culture that not only celebrates taking risk, but that actually knows how to fail better?

Have you heard brands’ espouse a commitment to omni-channel and seamless integration that still operate with silo-ed organizations, silo-ed customer data, silo-ed systems and channel-driven, rather than customer-focused, metrics?

Perhaps you have a friend or a loved one who say they are full of love and compassion and who constantly speaks of making big changes in their life, but has yet to put any of it into practice?

When was the last time something worth doing spontaneously emerged at your organization? When the last time a major transformation happened without an all-in commitment from leadership and a willingness to take on the status quo? When was the last time you’ve made a big change in your life merely through talking about it?

Intentions are great. Concrete plans are better. But the work that matters is in the doing, in taking the plunge, in taking head-on the things that scare us, in making a ruckus.

Yes, it might not work. Sure, you could look stupid or reckless. And, there is a pretty good chance you’re going to piss some people off along your journey. That’s probably a clue that you’re on the right track.

Get out of the stands and into the arena. Anything else is just really good imagination.

On average, you’re out of business

Walk through most shopping malls today and much of what you’ll encounter looks pretty similar. Average products for average people. Undifferentiated sale banners screaming at us from storefront windows. Copy cat promotional signs atop virtually identical racks. A sea of sameness.

Go online and not much is different. Navigation and shopping carts across most websites feel quite familiar. Take the logo off the site and you’d be hard-pressed to identify the brand. In our quest to improve conversion and cart abandonment rates we most often choose what we know works–the “best in breed.”

Our physical and virtual mailboxes are chock-a-block with one-size-fits-all marketing messages employing tried and true, but mostly tired, techniques. And much of it touts discount, not relevance.

When we’re afraid to take risks, when we seek efficient rather than remarkable, when we mostly mimic known best practices, our tendency is to regress toward the mean. And slowly but surely, we shave off the interesting and polish the customer experience until it feels safe, but is often utterly boring.

When scarcity of choice and access existed–and brands were in control–it wasn’t terribly difficult to get away with being average.

But as the power continues to shift to the consumer, as she has an endless aisle of choices and access to almost anything imaginable 24/7, average is no longer safe. In fact, it’s precisely the opposite.

Imitation may be flattering, but in the battle for the share of attention that ultimately drives long-term success, well, not so much.