Bricks and Mobile · Customer-centric · Digital · e-commerce

Physical retail: Definitely different, far from dead

From recent headlines you might assume that sales in brick & mortar stores must be falling off a cliff. You’d be wrong. Yes, e-commerce is growing at a much faster rate, but revenues in physical stores remain positive (1%-2% growth depending on the source). There is also a sense that online shopping is becoming the dominant way most people shop. In fact, even with a dramatic share shift, e-commerce still represents less than 10% of total retail sales and is expected to remain below 20% even 5 years from now.

Moreover, if physical retail is dying somebody should tell well established (and quite profitable) retailers like Aldi, Apple, Costco, TJX, Dollar General, Dollar Tree, Nordstrom, H&M, Ulta and Sephora. Collectively they’ve announced plans to open about 3,000 stores. Newer brands–think, Bonobos, Casper, Warby Parker–that were once dubbed geniuses for their “digitally native” strategy are now opening dozens of physical stores as their online-only plans proved limited and unprofitable. A little outfit from Seattle also has recently made a pretty big bet on physical retail.

So the constant media references to a “retail apocalypse” may serve as great clickbait, but they lack both accuracy and nuance. I believe we’re all better served by not painting the industry with too broad a brush and spinning false narratives.

Nevertheless, it is crystal clear that years of overbuilding, failure to innovate on the part of most traditional retailers, shifting customer preferences and market-share grabs from transformative new models that aren’t held to a traditional profit standard (mostly the little outfit in Seattle) are creating fundamentally new dynamics.  Physical retail is not going away, but digital disruption is transforming most sectors of retail profoundly. Here are a few important things to bear in mind:

Good enough no longer is. Mediocre retailers were protected for years by what was once scarce: scarcity of product and pricing information, scarcity of assortment choice, scarcity of strong local competition, scarcity of convenient ways for product delivery. Digital commerce has created anytime, anywhere, anyway access to just about everything and the weaknesses of many retailers’ business models have been laid bare. Traditional retailers’ failure to innovate over the past decade has put quite a few in an untenable position from which they will never recover. It turns out they picked a really bad time to be so boring.

E-commerce is important. Digital-first retail is more important. The rise of e-commerce is having a dramatic effect on shopping behavior but it is not the most disruptive factor in retail. What’s far more transformative is the fact that most customer journeys for transactions that ultimately occur in a brick & mortar location start in a digital channel–and increasingly that means on a mobile device. In fact, digitally-influenced physical stores sales are far greater than all of e-commerce. Many brands’ failure to understand this reality caused them to waste a lot of time and money building strong online capabilities at the expense of keeping their stores and the overall shopping experience relevant and remarkable.

Physical and digital work in concert. A retail brand’s strong digital presence drives brick & mortar sales and vice versa. When different media and transactional channels work in harmony, the brand is more relevant. When any aspect is unremarkable or creates friction, the brand suffers. Too often, traditional retailers treat digital and physical retail as two distinct entities when most customers are, as some like to say, “phygital.”  Moreover, with the exception of products that can literally be delivered digitally (books, games, music), there is rarely any inherent reason why the rise of e-commerce should make a substantial number of physical stores completely irrelevant. Retailers that are closing a lot of stores most often have a business model problem, not a “too many stores” problem.

The future will not be evenly distributed. Clearly, there are brands and retail categories that are being “Amazon-ed.”  There are also sectors that have been in long-term decline (department stores and many regional malls), whose troubles have little to do with what’s transpired most recently. Still others have remained largely immune from the disruptive forces that are hitting others so hard. Off-price chains, warehouse clubs, dollar stores and gas stations all come to mind. Grocery shopping has also seen little impact, though that’s likely to change. It’s also important to note that some forces that are shaping the industry have little to do with e-commerce vs. physical stores shopping or the notion that Amazon is eating the world. Many sectors are being hit by a fundamental change in shopping behavior (a shift to experiences away from stuff, a tendency to trade down to lower price points) that has nothing to do with how spending is being reallocated away from brick & mortar to online. Your mileage may vary.

To be sure, a degree of panic is appropriate in some circles. It’s obvious that many retailers spent more time defending the status quo and burying their heads in the sand during the past decade than they did understanding the consumer and being committed to innovation. Some retailers need to adapt. Some need to transform the customer experience fundamentally. Others just need to go away. Most need to take bold and decisive action to stay relevant and remarkable in a very different and constantly evolving world.

The big question is whether they will act while they still have time.

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 · Winning on Experience

Attraction, not promotion (redux)

If you are familiar with 12-step recovery programs you know about the Eleventh Tradition of Alcoholics Anonymous, which goes as follows: “Our public relations policy is based on attraction rather than promotion.”

The obvious reason for this practice is that 12 Step programs have the anonymity of their attendees at their core. Moreover, AA–and its spin-off programs–reject self-seeking as a personal value. But it goes deeper.

Most people do not wish to sold to. If I have to hit you over the head again and again with my message, perhaps you are not open to receiving it. Or maybe what I’m selling just isn’t for you. Shouting louder and more often, or pitching all sorts of enticements, may be an intelligent, short-term way to drive a first visit, but all too often it’s a sign of desperation or lack of inspiration.

12 Step programs were among the first programs to go viral. They gained momentum through word of mouth and blossomed into powerful tribes as more and more struggling addicts learned about and came to embrace a recovery lifestyle. No TV. No radio. No sexy print campaigns. No gift cards. No ‘3 suits for the price of 1’. When it works it’s largely because those seeking relief want what others in the program have.

In the business world, it’s easy to see some parallels. Successful brands like Nordstrom, Apple and Neiman Marcus run very few promotional events and have little “on sale” most days of the year. And, it turns out, they sell a very large percentage of their products at full price and have low advertising to sales ratios. Customers are attracted to these brands because of the differentiated customer experience, well curated and unique merchandise and many, many stories of highly satisfied customers. Net Promoter Scores are high.

Contrast this with Macy’s, Sears and a veritable clown car of other retailers who inundate us with TV commercials, a mountain of circulars and endless promotions and discounts. Full-price selling is almost non-existent. How many of these brands’ shoppers go because it is truly their favorite place to shop? How many rave about their experience to their friends? Unsurprisingly, marketing costs are high, margins are low and revenues are stagnant or declining.

Migrating to a strategy rooted in attraction vs. promotion does not suit every brand, nor is it an easy, risk-free journey. Yet, I have to wonder how many brands even take the time to examine these fundamentally different approaches?

How many are intentional about their choices to go down one path vs. the other? How many want to win by authentically working to persuade their best prospects to say “I’ll have what she’s having” instead of beating the dead horse of relentless sales promotion and being stuck in a race to the bottom.

Maybe you can win on price for a little while. Maybe you can out shout the other guys for a bit. Maybe, just maybe, if you can coerce a few more suckers, er, I mean customers, to give you a try, you can make this quarter’s sales plan.

And sure we didn’t make any money, but we’re investing in the future, right?

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Being Remarkable · Brand Marketing

Confusing the offering with the story

We’re typically pretty good at laying out the features and benefits; at explaining all the reasons why our product offering is superior to the competition’s and why it makes perfect sense that you should choose us.

Unfortunately when the consumer is overwhelmed by choice, when it’s hard to get them to even notice us–much less take the time to do the rationale calculation we are depending on–and when all too often price can be the default tie-breaker, all that focus on defining and hyping our offering may not benefit us very much at all.

If you think Apple wins because of its superiority in a head to head features comparison, think again.

If you believe folks pay a huge premium for a Louis Vuitton handbag because of the demonstrably superior raw materials, fabrication and stitching, I’d beg to differ.

The idea that the $250 cream or scent being hawked at the cosmetics counters at your favorite fancy department store “works” meaningfully better than what’s readily available at your local drug store is pure folly.

Unless it’s all about price, people buy the story before they buy the product. We get in trouble when we don’t understand the differences and the priority.

Being Remarkable · Customer Growth Strategy · Innovation · Omni-channel

Your mileage will vary

We’re told to pray to the god of omni-channel retail and all will be well. Yet after diving into a world of complexity and huge cash outlays, sales and profits remain lackluster.

We’re advised to study best practices and creatively “steal” the ones that resonate the most. Yet, despite reading all the books and hiring the leading consultants, our customer experience remains far from Apple’s and our culture feels like the anti-Zappos. And nobody’s working a 4 hour work week, I can tell you that!

We’ve built a sexy app. We’ve started an Innovation Lab. We go to all the best conferences. We even know to call it “South By” like the cool kids. We’re on every imaginable social media channel. We chant “seamless customer experience” at our staff meetings, for crying out loud! Why aren’t things going better?

Sadly, even if you do a great job importing what’s working for others, chances are you’re merely keeping pace. Necessary, not sufficient.

Assuming that what works for one brand and their unique customer set is readily transferable to your situation is not almost always wrong, it can be incredibly dangerous.

As the power shifts irretrievably to consumers, as their options for information, access and choice compound exponentially, as it gets harder and harder to command share of attention, your job is not to simply import what’s worked elsewhere and propagate “me-too” solutions.

No, your job is to deeply understand your unique situation, to embrace a treat different customers differently philosophy and to craft an intensely relevant and powerfully remarkable experience.

As tempting as it is to buy the sexiest car in the lot, equipped with the latest technology and anticipate the rush of exhilaration as you step on the gas, the fact is your mileage will vary–perhaps, a lot. The sooner we accept that the better.

And then it’s time to begin the hard, uncomfortable work.

Being Remarkable · Growth · Innovation · Leadership

But first you have to believe

I’m all for market studies. And consumer research. And fact-based analysis. I’ve rarely met a 2 x 2 matrix I didn’t like.

I’m all for laying out reasonable hypotheses and putting together a sound testing plan. If I’m honest, I’m pretty solidly in the  “in God we trust, all others must bring data” camp.

But for me there’s no getting around this pesky little slice of reality. More times than not, the truly innovative, the remarkable, the profoundly game-changing, emerges not from an abundance of analysis and left-brain thinking, but from an intuitive commitment to a bold new idea.

More than a decade ago the folks at Nordstrom didn’t have an iron-clad, ROI supported business case when they made the big leap into investing behind channel integration. They believed that putting the customer at the center of what you do is ultimately going to work out.

Steve Jobs eschewed logic and conventional wisdom to pursue Apple’s strategy of “insanely great” products. He believed that leading with design and focusing on ease of use creates breakthrough innovation and customer utility.

Just about every successful entrepreneur adopts a strong and abiding belief in her product or service in the face of facts and history that suggest that, at best, they are wasting their time and money and, at worst, they are simply nuts.

On the other side–with clients and in organizations where I’ve been a leader–a lack of belief that getting closer to the customer is generally a good idea or that it’s okay to fail has resulted in an unwillingness to invest in innovation. Any meaningful action was predicated on a tight business case and, when that was lacking, it was easier to do nothing than to take a chance. All these brands are now struggling to catch up.

Obviously commitment to a belief is not, in and of itself, sufficient. Execution always matters. And there are certainly plenty of strongly held beliefs that are wildly misguided or morally reprehensible.

Yet, when I embrace the notion that just about every great idea starts with a belief not a compelling set of facts–or that often some people see things way before my logical brain can-the field of possibilities expands.

And I believe that sounds like a pretty good thing.

 

 

Being Remarkable · Branding · Marketing · Retail · Winning on Experience

No pottery, no barn, no crates, no barrels

Is Crate & Barrel a good name for an upscale home furnishings store?

Does it bother you that Pottery Barn has no pottery for sale and that their stores look nothing like a barn?

In my experience, one of the most frustrating experiences one can have in business is to go through a naming exercise for a new product or service.

I worked on developing a new specialty store concept several years ago and during the search for its name, our CEO came into my office virtually every day to either throw out some idea he came up with the night before (“what if we call it ‘Cool Stuff’?”) or to get my reaction to some existing store name that baffled him (“what’s up with Banana Republic?”).

Of course the issue is that so often we become obsessed with the name, rather than focusing our attention on building a brand. A name without a relevant, differentiated and compelling set of experiences, delivered consistently, over time, risks becoming just a meaningless description.

Now, experts in branding will tell you that there are qualities that make for better names–things like being unique, memorable, easy to pronounce, evocative, supportive of your positioning and the like. And, I certainly recommend that you incorporate this advice into your naming process. By now it’s clear that BlackBerry was a better choice than sticking with the product’s original more literal name PocketLink.

So go spend some time on finding a “good” name. But spend far more time and effort on creating and executing a great brand.

And if you need some inspiration, go do a Google search on your Apple.

 

 

 

 

 

Brand Marketing · Customer-centric · Omni-channel

Incongruous

Earlier this week I needed to call Apple support to get help with my iCloud account.  I was bounced to three different customer service folks over an hour or so before I finally got to Craig (who ultimately did a great job of handling my issues).

Most of the hour plus that I was on the phone I was on hold and had to listen to loud, tinny and static-filled bad 90’s music (I know that’s redundant).

I was struck by how incongruous this all was.  Apple stands for an easy customer experience, yet they could not manage to come close to being “one and done” in resolving my customer service issue.  Apple is the paragon of innovation, yet their hold music sound quality was an abomination.  Apple stands for hip and cool, yet their music offering was anything but.

Apple is hardly alone in delivering an incongruent brand experience.  As the distinctions blur between channels and touch-points, far too many brands still fail to create a seamlessly integrated experience regardless of how the customer chooses to engage and shop.

In a world of ever-expanding choices–where, increasingly, the consumer holds most of the power–your brand is only as good as your weakest link.

Incongruous may make you superfluous.

Being Remarkable · Customer Growth Strategy · Customer Insight · Customer-centric · Me-tail · Mobile · Multi-channel · Omni-channel · Winning on Experience

8 things that are wrong with your omni-channel strategy

Read anything about retail, attend a conference, get pitched by a consultant, evaluate a new software product, and chances are you hear “omni-channel” mentioned early and often.

So with geniuses like me throwing the term around ad nauseam, let’s get specific about what is probably wrong with your current strategy and what you need to do to go from meaningless words to remarkable action.

  1. Focusing on semantics rather than strategy. I’m often asked what’s the difference between “multi-channel” and “omni-channel” and my answer is typically: “Not much and who cares.” The point is having a strategy that reflects how customers shop today. The point is designing a value proposition that fights and wins in an increasingly blurred channel world. The point is delivering a compelling customer experience day in and day out. Call it whatever the hell you want. It’s what you do that matters.
  2. An appalling lack of customer insight. If you are blessed with a killer offering and virtually no competition, go straight to #3. But if you don’t work at Apple or Google, chances are you need an actionable customer segmentation. Chances are you need far better insight around consumer behavior. Chances are you need to be able to differentiate your target customers by needs and value. If you don’t have the data to treat different customers differently, you are at a huge disadvantage.
  3. Your mileage may vary. On one side, you have pundits screaming that if you aren’t “omni-channel” today you will be out of business tomorrow. On the other side, there are those that find that sentiment preposterous; just look at Amazon, they don’t have retail stores and they are doing fine. The truth is that every brand’s situation is different. An omni-channel strategy as an abstract concept is useless. An omni-channel strategy that reflects the reality of YOUR consumers, YOUR competition and YOUR current and future capabilities is all that matters. You aren’t Amazon. You aren’t Nordstrom. You aren’t Macy’s. Take what you like from some of the leaders and leave the rest.
  4. Screwed up metrics. Ask a retailer about their  “same store sales” and “gross margin rates” and “sales per square foot” and the growth in their brick and mortar stores compared with e-commerce sales and you are inundated with data and commentary. Ask them about growth in key customer segments, segment profitability, traffic conversion or retention rates, cross-channel browsing behavior and the like, and you are probably met with silence or meaningless babble. What gets measured gets done. But if you are focused on the wrong data you are going to do the wrong things.
  5. A dumb organization structure with dopey incentives. Most of the time I was at Neiman Marcus our then CEO would get on analyst calls and talk about our “compelling multi-channel strategy.” We included similar words in our annual reports and investor presentations. In reality, we were organized by channel, had no meaningful truly customer-centric efforts and all the top executives had incentives to maximize their own fiefdoms. Silos belong on farms. If are serious about “omni-channel’ you need to set a structure that reflects customers first, and channels and/or products, second. You need to pay your people on those things that truly advance key customer segment growth, engagement, loyalty and advocacy over the long-term.
  6. Confusing the vehicle with the destination. Yes, the web can be a sales channel, but for most retailers it is mostly a tool. Having a social media or mobile strategy is critical, but only as a means to your customer growth strategy ends. If you don’t know where you are going, any road will get you there.
  7. Failure to ship. The era of months of intensive market planning, controlled testing and the big reveal are over. In case you haven’t noticed, things move a lot faster today, communication channels are increasingly blurred, and customer desires are far less predictable. Trial and error works far better than spectacular planning and flawless execution. Better to ship often and fix it in the mix.
  8. Neglecting relevance. Retailers are great at talking to themselves. And passing to where the receiver used to be. And wallowing in me-too-ism. And going big and easy, rather than small and challenging. Treat different customers differently. Make it relevant. Extra points for remarkable.
Being Remarkable · Customer Growth Strategy · Customer Insight · Customer-centric · Growth · Winning on Experience

JC Penney swings for the fences (Part 3): When the invitation is better than the party.

I like Penney’s new marketing campaign.

The TV ads featuring Ellen DeGeneres are captivating and funny–and seemingly everywhere. The print campaign does a solid job of re-branding JCP as fresh and contemporary, the monthly theme is carried through each piece beautifully and the featured items look great and seem well-priced. My only criticism is that the ads look a bit too much like Target (gee, I wonder how THAT happened).

But here’s the thing. Over the long-term the work of marketing is to differentiate the brand, create strong preference and reinforce loyalty/advocacy. Penney’s won’t win without doing a much better job of attracting and retaining a new generation of consumers and increasing the trip frequency, average purchase size and/or retention rate of the current base.

In the short-term, the work of marketing is to get the target customers’ butts in the store (or drive them to the website). I suspect the new campaign IS elevating interest in JCP and starting to drive incremental traffic. Yet while Penney’s has improved their presentation markedly, the stark reality is that both the product assortments and overall experience are still pretty much the same–i.e. unremarkable in most instances. And unlike Apple and Target, Penney’s store fleet is a grab bag of some very good locations with a whole bunch of mediocre and lousy ones.

We all know that when the invitation is better than the party, we aren’t very likely to get fooled the next time around.