Working on the wrong problem

When we see a brand struggling–or we find ourselves working within a flailing or failing organization–the first order of business should be clear. We need to understand the root causes. Once we’ve become keenly aware of what’s driving our problem–and accepted the reality of the situation–we are then ready to move into developing and launching a course of action.

So if the path is clear and obvious, why do so many retailers–and scores of other types of organizations, for that matter–get it so very wrong, so very often?

We regularly see retail brands hyper-focused on cost reductions when by far the bigger issue is lack of revenue growth (I’m looking at you Sears).

We see brands falling prey to the store closing delusion when often it turns out that closing stores en masse only makes matters worse.

We see brands blindly chasing the holy grail of all things omni-channel when, in most cases, they are merely spending millions of dollars to transfer sales from one pocket to the other–often at a lower margin.

We brands engaging in price wars they can never possibly win or without regard to the possibility that their customers aren’t even interested in the lowest price.

We see brands chasing average, the lowest common denominator, the one-size-fits-all solution because it seems safe. Yet it is precisely the most risky thing they could do.

Far too often we fail to pierce the veil of denial.

Far too often we fall victim to conventional wisdom, what we’ve always done or what we think Wall Street wants.

Far too often we ascribe wisdom to shrewd salespeople or charismatic and clever charlatans.

Far too often we fail to do the work, to ask for help, to dig deep to understand what’s really going on.

We can work really hard. We can focus our energies and those of our teams we great alacrity and intensity. We can pile on the data, build persuasive arguments and rock a really slick PowerPoint presentation. We can tell ourselves a story that convinces us we must be right.

But if we aren’t working on the right problem that’s all a colossal waste of time.

 

 

Easy to measure, not all that useful

For a long-time the retail industry has focused on same-store sales as the primary measure of a retailer’s success. This ignores the fact that a brand can drive a sales increase through excessive promotions and completely destroy profitability. It fails to recognize that we can teach consumers to become promiscuous shoppers and have them show up in droves during a given sales event while completely undermining true loyalty. It neglects the reality that total channel performance in a given trade area is a better metric because comp store sales don’t account for the role of a physical presence in creating a viable e-commerce model.

More recently, we’ve latched onto the growth of e-commerce as a key barometer for success, failing to acknowledge that virtually every pure-play brand has an unsustainable business model that is rapidly approaching its expiration date. We also seem to forget (or deny) that for most established omni-channel retailers the outsized increases are merely the result of existing customers shifting their sales away from a physical store to a channel with typically far worse economics (owing primarily to incredibly high fulfillment costs).

We work to optimize the ratio of digital ad spending to digital sales, even though we know that digital mostly drives physical channel volume. Worse yet, we make these sort of measures a part of an incentive scheme that reinforces the silo-ed behaviors that undermine customer-centricity.

We obsess over our e-commerce conversion rates even though they are highly imperfect measures of long-term consumer engagement and retention and we know that so much of our traffic is really part of the customer’s journey to a brick & mortar location anyway.

Attribution is messy. Economics is messy. Getting our organizations and constituencies to let go of metrics, processes and habits that are no longer relevant is messier still.

Yet just because we’ve always done it that way is a terrible reason to continue doing so.

Just because someone else expects us to do it doesn’t mean we have to.

Just because it’s easy to measure doesn’t make it useful.

And just because doing something is hard or imperfect doesn’t mean it isn’t worth trying.

 

h/t to Seth for inspiring this post.

Stop blaming Amazon for department store woes

Given Amazon’s staggering growth and willingness to lose money to grab market share it’s easy to blame them for everything that is ailing “traditional” retail overall–and the  department store sector in particular.

In fact, with announcements last week from Macy’s to Kohl’s and Sears to JC Penney that could only charitably be called “disappointing” many folks that get paid to understand this stuff reflexively jumped on the “it’s all Amazon’s fault” bandwagon. Too bad they are mostly wrong.

The fact is the department store sector has been losing consumer relevance and share for a long, long time–and certainly well before Amazon had even a detectable amount of competing product in core department store categories.

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The fact is it’s just as logical to blame off-price and warehouse club retailer growth–which is almost entirely done in physical locations, by the way–for department stores’ problems.

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The fact is that, despite other challenges along the way, Nordstrom, Saks and Neiman Marcus have maintained share by transitioning a huge amount of their brick & mortar business to their online channels and have closed only a handful of stores in the last few years. Nordstrom and Neiman Marcus now both derive some 25% of their total sales from e-commerce.

Don’t get me wrong, I’m not saying that Amazon isn’t stealing business from the major department store players. Clearly they are. And as Amazon continues to grow its apparel business they will grab more and more share.

But the underlying reason for department stores decades long struggle is the sector’s consistent inability to transform their customer experience, product assortments, marketing strategies and real estate to meet consumers’ evolving needs.

More recently, those brands that have been slow to embrace digital first retail are scrambling to play catch up. Those that still haven’t broken down the silos that create barriers to a frictionless shopping experience will continue to hemorrhage customers and cash.

Most importantly those that think they can out Amazon Amazon are engaged in a race to the bottom. And as Seth reminds us, the problem with a race to the bottom is that you might win.

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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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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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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.

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.