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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A really bad time to be boring · Reinventing Retail · Retail

Retail 2018: Now Comes The Real Reckoning

There is some dispute over whether more stores opened during 2017 than were closed. IHL says yes. Fung Retail Tech says no. Mostly I say “who cares”?

Either way, it’s clear that the retail landscape is changing rapidly, causing some retailers to prune their store counts, shutter locations en masse or liquidate entirely. What’s unfortunate–and not the least bit useful–is the tendency to declare that physical retail is dying and that we are going through some sort of “retail apocalypse.” The facts clearly do not support this notion. Similarly devoid of substance and nuance is the proclamation that e-commerce is eating the world and that virtually all “traditional” retailers are falling victim to the “Amazon Effect.”

What IS occurring at the macro-level is three-fold. First, the irrational expansion of retail space during the past two decades is finally correcting itself. Second, as retailers better understand the physical requirements to support a world where online is a significant and growing sales channel, many are optimizing their footprints to better align space with demand. Third, and far more important, is that retail brands that failed to innovate and create a meaningfully relevant and remarkable value proposition are rapidly going the way of the horse-drawn carriage.

A look at either the IHL or the FRT data reveals precisely the same picture. Lots of physical stores are being opened on the part of brands that have a winning formula, both in the value sector (think TJX, Aldi, Costco, Dollar General) and at the other end of the spectrum (think Nordstrom, Sephora, Ulta). Overwhelmingly, the retailers that are closing large number of stores are those that have operated in the vast undifferentiated middle. And it’s becoming increasingly clear that it’s death in the middle.

Physical retail is not dead. Boring retail is.

I believe the majority of over-capacity from excessive building has now been dealt with (or will be as retailers do typical post-holiday store closings). I believe most sophisticated retailers have a clear understanding of the go-forward physical requirements to best support a harmonized (what some prefer to call “omni-channel”) strategy.  They get the critical role that physical stores play in supporting the online business and vice versa. This implies that retailers that have fundamentally sound value propositions won’t be closing very many stores this year. And the best positioned brands will defy the bogus retail apocalypse narrative and continue opening stores–in some cases large numbers of them.

The flip side is that retailers with unremarkable concepts will continue their march toward oblivion. Some will hang around longer than they should–I’m looking at you Sears–because they have assets to sell off to raise cash, all the while delaying the inevitable. Store closings are a panacea, not a fix.

Similarly, many pure-play online brands with unsustainable economics will either figure out a viable bricks & clicks strategy (e.g. Warby Parker), get acquired by the digitally-native brand bail out fund known as Walmart or go ‘buh ‘bye having burned through both their cash and all the greater fools.

For me, last year was a large scale, inevitable pruning away of the brush. Now in 2018, with the obvious losers having been closed in 2017, we get to see far more clearly the brands that truly have longevity, be they omni-channel” or pure-plays.

Now we get to witness the real reckoning.

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 information on keynote speaking and workshops please go here.

 

A really bad time to be boring · Reinventing Retail · Retail

Where in the world is Steve?

I’ll be traveling quite a bit over the next few months attending major industry conferences and (often) delivering my latest keynote “A Really Bad Time To Be Boring: Reinventing Retail In The Age Of Amazon.”

January 14-16  New York  NRF’s Big Show
February 6  Boston  MITX e-Commerce Summit
February 13 Dallas  FEI Dallas
February 28  Melbourne, Australia  Inside Retail Live
March 18-21  Las Vegas  ShopTalk
April 17-19  Madrid, Spain  World Retail Congress
May 1-2  New York  Retail Innovation Conference

Additional dates will be announced shortly.

If I’m in your town I hope we’ll get a chance to connect.

 I’m doing a webinar on February 14 “Omnichannel Is Dead. Long Live Omnichannel.”
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A really bad time to be boring · Reinventing Retail

2017’s most popular blog posts

As is my tradition, here’s my annual recap of my 2017 posts that got the most traffic. Once again my April Fool’s Day one easily grabs the top position .

  1. Every single retail store in the US to close permanently by month’s end
  2. Stop blaming Amazon for department store woes
  3. Retail’s single biggest disruptor. Spoiler alert: It’s not e-commerce
  4. Retail’s great deleveraging
  5. Retail’s next punch in the face
  6. Department stores aren’t going away, but 3 big things still need to happen
  7. Going private: Here comes Amazon’s next wave of dismantling and disruption
  8. The future of retail will not be evenly distributed
  9. The store closing panacea
  10. The retail apocalypse and the urgent quest for the remarkable

For my most popular articles on Forbes during 2017 go here.

Being Remarkable · Omni-channel · Reinventing Retail · Retail

My top ten Forbes posts of the year

Earlier this year I had the honor of joining Forbes as a retail contributor.

As is my tradition, I’ll publish my top ten list from my blog right after the New Year. For now, here are my most popular articles on Forbes during 2017. One thing is for sure: folks were interested in hearing me opine about Sears. I have a feeling that window is closing.

  1. Sears Must Think We’re Stupid Or Gullible: Here’s Why
  2. Sears: Is The End Finally In Sight For The World’s Slowest Liquidation Sale?
  3. Here’s Who Amazon Could Buy Next And Why It Probably Won’t Be Nordstrom
  4. The Inconvenient Truth About e-Commerce: It’s Largely Unprofitable
  5. Omnichannel Is Dead. Long live Omnichannel.
  6. Sears March Toward Bankruptcy: Gradually, Then Suddenly
  7. Sears: Dead Brand Walking
  8. Reports Of JC Penney’s Death Are Greatly Exaggerated 
  9. Luxury Retail Hits The Wall
  10. With Kenmore Deal Amazon Is A Winner. For Sears, Not So Much

And this one goes to 11: Hype-y Holidays: Black Friday And Other Nonsense

Thanks for reading and engaging this past year.

A most happy and peaceful New Year to all!

Top.Ten_

 

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

Retail reality: It’s death in the middle

I first pointed to what I called “retail’s great bifurcation”literally two years ago today. Though it wasn’t the first time that I had observed what I saw as the impending collapse of the middle. I began writing and speaking about that during 2011.

As we emerged from the financial crisis it seemed clear to me that retail brands were faced with the proverbial fork in the road. A strategy of being just about everything to everybody–of selling average products to average people in an average experience–was becoming increasingly untenable. While it’s easy to credit the “Amazon effect,” or the overall rise of e-commerce, that’s only part of the story. The fact is many factors conspired to squeeze the middle, while, for the most part, the two ends of the spectrum continue to thrive.

For years now brands that execute well on price, dominant assortments, buying efficiency and convenience are winning. Amazon, Walmart, Best Buy, Home Depot, Costco and virtually all the off-price giants and dollar stores, are driving strong growth and profits. And–I hope you are sitting down for this–despite the silly retail apocalypse narrative, they are all opening stores–in some cases lots of them. Similarly, we find many success stories at the other end of the spectrum. Most established luxury brands are experiencing strong growth, as are higher-end specialty retailers who have a tight customer focus, offer a superior experience and provide a real emotional brand connection. Think Apple, Bonobos, Nordstrom, Sephora, Ulta, Warby Parker and many more. Somehow living in the age of Amazon and digital disruption has not come remotely close to creating an existential crisis for these retailers.

Of course, the story is very different for others in the great, mostly undifferentiated, wasteland of the middle. Most of the retailers that have recently made their way to the retail graveyard or find themselves at the precipice suffer from a decided lack of relevance and remarkability. They have decent prices, but not the best price. They have some service, but nothing to get excited about. Their product assortments and presentations are drowning in a sea of sameness. The overall experience is dull, dull, dull. It’s not surprising that a quick perusal of a store closing tracker features names like Sears, J.C. Penney, Macy’s and Radio Shack; brands that staked out the moderate part of the market long ago and have failed to innovate in any material way. Most of these companies now lack the financial resources, time and organizational DNA to affect the necessary transformations. This will end badly.

While it’s tempting to blame Amazon for the deep troubles faced by mid-priced department stores, the category has been on the decline for more than two decades. Studies also show that the majority of market share lost by these players in recent years has gone to the off-price sector. To be sure, Amazon is putting pressure on most sectors of retail. Further, the rise of digital shopping has created a radical transparency that places the customer firmly in charge. In many respects what was once scarce–reliable product information, lower prices, access to products from across the country (and around the world), rapid delivery–no longer is. No customer wants to be average and today, in most instances, no customer has to be. And, for those brands that have seriously invested in deep customer insight and committed to a “treat different customers differently” strategy, there is no place for unremarkable competitors to hide. Good enough no longer is.

The bifurcation of retail is only going to become more pronounced. The fork in the road is more and more obvious. The collapse of the middle will only get worse.

It turns out it’s really bad time to be boring.

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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.  For information on keynote speaking and workshops please go here.

Consolidation · Reinventing Retail · Store closings

Sears: Dead brand walking

Recently Sears Holdings made several interesting announcements. First, it declared it was closing 63 more stores, in a continued false notion that it can shrink itself to prosperity. This is in addition to the 358 Sears and Kmarts already shuttered in 2017. Then it issued a press release detailing steps it’s taking to improve its financial structure, wherein it included operating results for the quarter. Despite over a decade of strategic restructuring, huge investments in its membership program and digital capabilities, closing hundreds of its worst locations–not to mention massive store closings on the part of many of its direct competitors–the company expected to report comparable store sales declines of 15.3% for the quarter and a loss of at least $525 million. Yikes!

Following all this, in what is likely to win the award for the most obvious prediction by a Wall Street investment analyst in modern history, Bill Dreher of Susquehanna opined that “Sears may never be profitable again.”

So while Sears apparently has a few folks willing to believe something good might still happen, the company continues to execute what I have long called “the world’s slowest liquidation sale.” In fact, Sears continues to act as if we’re all either gullible or stupid. Or perhaps both.

Despite growing signs of its imminent demise–or at least a complete collapse into a holding company with a small and decidedly mixed bag of residual assets–Sears Holdings CEO Eddie Lampert continues to put lipstick on the pig. A couple of weeks ago he took the Wall Street Journal to task for a rather harsh story by posting a retort on the company’s blog, in which he once again neglects to discuss anything that would meaningfully improve customer relevance, but goes to great lengths to highlight moves that are clearing perpetuating, if not accelerating, declining performance. And in what may be the surest sign that the company’s beleaguered CEO has no capacity for irony, the day after the company shared its horrible quarterly performance Sears announced it was opening two (count ’em two!) small format appliance & mattress stores.

The news at Sears went from bad to sad a long time ago. As I have recounted before, back in 2003 when I was part of the senior team working on trying to fix the department store business, it was abundantly clear that Sears’ concentration of assets (particularly for its home business) in regional malls was a significant and growing liability. It was also apparent that Sears had much more of a revenue problem that a cost problem. As we sit here fourteen years later, average store sales productivity has declined in virtually every quarter since I moved on from the outhouse to the penthouse (Neiman Marcus Group) and beyond. The major appliance and home improvement businesses, which once were incredibly profitable, are largely decimated. Years of cost cutting have made Sears’ stores an embarrassment. Market share continues to plummet.

In the spirit of full disclosure, our team did not come up with a compelling plan to turn around Sears, so for me it has always been an open question whether anybody could have saved them. I was certainly neither smart enough, nor powerful enough, to make it happen. But I have always hoped Lampert and team would figure it out.

In any event, at this point any notion that Sears can be saved in any way remotely resembling a major national retail brand is the pinnacle of wishful thinking. Yet some people still seem to hold out hope. It’s time to let that go.

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

For information on speaking gigs please go here.

Being Remarkable · Reinventing Retail · Store closings

Department stores aren’t going away, but 3 big things still need to happen

It’s been a long, slow slide for department stores. Starting some two decades ago, the major chains began leaking share to the big-box, off-the-mall players. Just as that started to stabilize somewhat, Amazon and other e-commerce pure-plays began chipping away at the sector’s once dominant position in apparel, accessories and home products. Most recently, in addition to the ongoing threat from online shopping, off-price chains have benefitted from a growing legacy of major chain mediocrity.

Unsurprisingly, investors have treated the sector like the plague. The market values of Macy’s, J.C. Penney, Sears, Dillard’s and Kohl’s have all plummeted. Even Nordstrom, which has performed relatively well, has seen its market value halved in the past couple of years. Just this past week J.C. Penney saw its shares, which were already off some 80% since 2013, plunge further after a surprise earnings warning. In addition, Sycamore looks to be picking at the carcass of Bon-Ton Stores and Lord & Taylor is selling its iconic Manhattan flagship to WeWork. And on and on.

For many, this unrelenting parade of bad news leads them to believe that department stores are toast. But just as the retail apocalypse narrative is nonsense, so is the notion that department stores are going away. I am willing to go out on a limb to say that a decade from now there will still be hundreds of large, multi-category brick-and-mortar stores operating in the United States and throughout the world. But despite this conviction, things are virtually certain to get worse before they get better and three major things must happen before any sort of equilibrium can be reached and decent profits can return.

Major space rationalization/consolidation. The overall retail industry is still reeling from decades of overbuilding, as well as the abject failure of most department store anchors to innovate to stay remotely relevant and remarkable. While the idea that major chains can shrink to prosperity is fundamentally misguided, it’s clear that a) most chains still have too many stores, b) the stores they have are, on average, larger than they need and c) there is no compelling reason for Sears, Kmart, Bon-Ton (and perhaps a few others) to exist at all. Many dozens, if not hundreds, of locations are certain to be whacked after the holiday season. And despite the liquidation sales that will put pressure on earnings in the first half of the calendar year, there is actually a real chance for year-over-year margin improvement by the time the holiday season rolls around this time next year.

A true commitment to be more focused, more innovative and more remarkable. It turns out department stores, like every other struggling retail brand, picked a really bad time to be so boring. It turns out that deferred innovation is even more crippling than deferred maintenance. It turns out that trying to be everything to just about everybody means being mostly irrelevant to a lot of folks. Given the certain continuing contraction of the sector, the only hope for remaining brands is to gain significant amounts of market share. And that only happens to any material degree by embracing intense customer-centricity to become more relevant to a tighter customer set and by consistently executing a far more remarkable experience than the competition. Continued flogging of me-too products, one-size fits all advertising, boring presentation and chasing the promiscuous shopper through promotion on top of promotion won’t cut it. Period. Full stop. The hard part is that most of the flailing brands are woefully far behind, lack a culture of innovation and simply don’t have the cash to do what it will take to right the ship.

Amazon needs to place its bet. It’s clear that Amazon has its sights set on being a much bigger player in apparel, accessories and home products. And it’s hard to see how Amazon gets speed, adds the necessary volume and addresses the vexing returns/supply chain issues without a major physical presence in the moderate and higher-end softlines arena. For that reason, I’m also willing to go out on a limb and predict that Amazon will buy a major department store player in 2018. And just as its acquisition of Whole Foods is transformative for the grocery industry, so too will be a much deeper brick-and-mortar (and omnichannel) presence in the department store sector. In fact, it’s hard to underestimate how a big move by Amazon here will reshape just about every imaginable facet.

While 2017 has brought more than its fair share of department store news–and we’re hardly finished–I see 2018 as being chock-a-block with not only profound news but likely representing the year when the future of the sector will become far more clear. Stay tuned.

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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

For information on speaking gigs please go here.

Being Remarkable · Reinventing Retail

Flailing retailers need to learn to ‘sell the hole’

I cannot begin to tell you how many times executives at various retailers have said to me that “it’s all about the product.” Earlier in my career, when someone would spout this alleged truism, my somewhat smug thought would be that I could easily come up with many examples where that was demonstrably false. In more recent years, I’ve come to believe that it is precisely retailers’ false clinging to this notion that helps explain why so many find themselves standing at the precipice.

We can argue at length about how important product features and benefits are to consumers’ purchase decisions and long-term loyalty. And clearly that varies by industry segment and customer type. Yet by now it should be obvious that in the vast majority of cases good product is necessary, but hardly sufficient, in determining retail success. It should be clear that people buy the story before they buy the product.

Stated differently, when a consumer buys a drill, it’s because they want the hole. When someone pays $4 for a bottle of water they are mostly paying for how that water makes them feel, not for the better taste. If you think Apple products are always objectively the best functioning, you are only kidding yourself. And if you believe that $200 jar of eye cream works any better that the stuff you can get at Walgreen’s, prepare to be disappointed. Second-best and just plain old mediocre products win all the time. It’s clearly not only about the product; it’s about the solution, the feeling, what our purchase says about us. As noted retail strategist Bill Clinton might say: It’s the experience, stupid!

It’s not all that difficult to understand how traditional retailers became overly product-centric. Take a look at the leadership at most retailers and most came up through the merchant ranks. While the era of the “merchant prince” is on the wane, there are still an awful lot of CEOs who are long on merchandising skills and short on customer experience and digital bona fides. And that mindset permeates the cultures of many struggling brands. It needs to be blown up.

Go through the list of bankrupt or severely struggling retailers and it should be readily apparent that while there may have been merchandising issues that contributed to their problems, their big issues emanate from a failure to deeply understand shifting customer preferences and to respond to those changes. As a result they ended up with a largely irrelevant and utterly unremarkable customer experience. And, as it turns out, they picked a really bad time to be so boring.

If flailing retailers — be they Toys ‘R’ Us, JCPenney, Macy’s or dozens of others — are to survive, much less thrive, the answer isn’t going to be found in shrinking to prosperity, trying to out-Amazon Amazon or being hyper-focused on improving their product assortments.

The answer is going to be found in crafting a truly remarkable and relevant customer experience that is far more about the hole than the drill.

Toys-R-Us

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 information on speaking gigs please go here.

Omni-channel · Reinventing Retail · Store closings

Are mass store closings the start of an inevitable downward spiral?

At the recent inaugural ShopTalk Europe event in Copenhagen, Hudson’s Bay Company CEO Gerald Storch posited that retailers risk hastening their demise by taking an axe to their store counts. Clearly there are many factors that contribute to a brand’s march to the retail graveyard, yet there is mounting evidence that Storch’s observation is on the money. As I’ve said many times, show me a retailer that is shuttering a large number of outlets and chances are the intrinsic problem is not too many stores but that the brand is not sufficiently relevant and remarkable for the stores it has.

I first surfaced this concern more than four years ago in my post “Shrinking to prosperity: The store closing delusion” and revisited it more recently with an updated Forbes post. While in many cases store counts need to be rationalized to address the overbuilding of the past two decades and to optimize store footprints given the shift to e-commerce, with rare exception, the retailers that are closing a large number of stores are working on the wrong problem.

When physical retail still accounts for 75-90% of a category’s volume, it’s hard to understand how radical cuts in store counts help address a brand’s ability to maintain, much less grow, market share. When we know for a fact that brick & mortar locations are key to supporting a viable and growing e-commerce business (and vice versa), mothballing dozens (or even hundreds) of stores only serves to undermine a retailer’s ability to meet customers’ evolving omni-channel demands. When we recognize that it is often far cheaper to acquire and serve customers through physical stores, reducing store counts substantially can worsen a retailer’s long-term cost position. And, as Storch points out, mass store closings erode purchasing power and can send consumers a signal that a retail brand is on its way to oblivion, serving only to make matters worse.

In fact, I cannot come up with a single major retailer that has closed 20% or more of its stores and is now considered truly healthy. On the other hand, I can easily name many that went through multiple iterations of down-sizing that have either liquidated or are currently in bankruptcy proceedings–Sears Canada being the most recent example. I can also list many that seem to be in perpetual store closing mode (Sears US for one) that thus far have been spared a visit from the grim reaper yet continue to see their operating results deteriorate with little hope for resurrection. For many, sadly, it’s dead brand walking.

We should also ignore any analysis that tries to estimate the number of store closings that a retailer must undertake to get back to prior store productivity levels. First, anchoring success on past store productivity metrics is largely irrelevant as it ignores a store’s contribution to online volume growth. Minimally, we need to understand the growth and profitability of a trade area and incorporate both e-commerce and physical store performance. Nordstrom and Neiman Marcus–just to name two powerful examples–have seen their historical store productivity numbers weaken, yet they still have healthy financial performance overall. Second, any such analysis is merely a rote arithmetic exercise that erroneously assumes that massive store closings don’t have any adverse impact on e-commerce, nor make a brand less relevant and competitive in consumers’ minds nor serve to de-leverage fixed costs.

Ultimately, I don’t see a scenario where store closings will be the silver bullet that troubled retailers need to get back on track. They may be a key piece in a needed reinvention, but the critical work centers on taking the required actions to make these troubled brands sufficiently relevant and remarkable such that they can stem the share of wallet loss that got them into trouble in the first place.

Said differently, if sales are the problem, working on the cost side will never help breathe a dying retailer back to life.

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 information on speaking gigs please go here.