Digital · e-commerce

Walmart’s E-commerce Strategy: Pure Genius Or Venture Capitalist Bailout Fund?

Some believe Walmart should be pilloried for its laggard status in e-commerce. Many of these same folks are now cheering the company’s decision to put all e-commerce under internet wunderkind Mark Lore, as well as its new aggressive strategy to acquire online brands (Jet, ModCloth, ShoeBuy, MooseJaw and–apparently any minute–Bonobos). At last, they say, the company is serious about taking on Amazon.

The contrarian view is that Walmart was right to go slow in online shopping because of how hard it is to make money, and that encouraging too much volume to shift from physical to digital channels would de-leverage brick & mortar store economics unnecessarily. Moreover, spending billions to acquire brands that seem to have little prospect of ever being cash positive may appease Wall Street, but it is throwing good money after bad. More than a few folks have also intimated that Walmart is mostly bidding against itself in these deals as the “smart money” now sees how crazy many so-called digitally-native brand valuations have become.

I tend to side with the latter camp. And, full disclosure, I’ve never understood how Jet.com could ever make any real money. I’ve also been on record for some time in my view that much of e-commerce is profit proof and that most digitally-native brands will never turn profitable. Of course, the jury is still out on most of this, but the collapse of the flash-sales market and recent big write-downs of some high-fliers should give investors pause and encourage them to see past the hype and to dig deeper.

Either way, there are a few important things to consider as Walmart’s strategy unfolds:

  • Shopping behavior is morphing dramatically. While e-commerce remains small to the total, it is growing much faster than physical store shopping. More importantly, most shopping trips start online. Any retailer that fails to have a strong digital presence and does not offer a well integrated shopping experience will be at a distinct competitive disadvantage. Walmart, like every other retailer, needs to respond to this trend aggressively even if the marginal economics aren’t always so favorable.
  • A digital-first mindset is critical. Here is where most “traditional’ brands get stuck. When a culture is rooted in the old way of doing business and holds on to product-centric thinking and siloed organizational structures, much needed innovation is thwarted and vast numbers of opportunities are missed. Arguably, the greatest value from Walmart’s new acquisition strategy is that they are injecting a new mindset into the organization and jump-starting a cultural transformation that can pay vast dividends.
  • Demographics are destiny. The core Walmart model is rapidly maturing. Walmart has never done well with more affluent consumers and they are likely not doing particularly well with acquiring increasingly important Millennial customers. One way or another, to sustain growth Walmart needs to figure this out and scale it quickly.
  • Organic growth is hard and time is not our friend. Most large companies struggle to move the needle on growth in any material way through their own internal efforts. If anything, the pace of change is accelerating. Clearly, a smart acquisition strategy is one way to address both of these challenges.
  • E-commerce valuations are mostly irrational. I have consulted to multiple investment firms and conducted due diligence on quite a few e-commerce deals–including one of the brands that Walmart acquired. In every case the prices that were being discussed at the time either proved to be ridiculously high (as evidenced by subsequent write-downs) or the company could not present a compelling roadmap to profitability. Clearly there are, and will continue to be, exceptions. But irrationality does not last forever. Bubbles eventually burst.

As skeptical as I am, Walmart needs to do something big and bold. Minimally, their culture will get shaken up, likely in a very good way. Managing a portfolio of innovative brands should give them plenty of useful learning. And, in the scheme of things, a poor ROI on a few billions dollars will hardly bring them to their knees.

Yet mostly I am struck by the words of a venture capitalist who has been struggling mightily with how he was going to salvage a multi-million dollar investment in a “disruptive” online brand that has garnered gobs of good PR but is burning through cash with no end in sight.

As he reflected on Walmart’s most recently announced acquisition he told me this: “Now I wake up every day and thank God for companies like Walmart.”

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.  

Winning on Experience

Every Single Retail Store in the US To Close Permanently By Month’s End

In a surprise move that underscores the sweeping changes faced by the retail industry, the National Retail Federation, speaking on behalf of all of its members, announced today that every brick & mortar location of every retailer in the United States would close forever within the next few weeks. For nearly a decade “traditional” retailers have been struggling with profitability as sales shifted online and more consumers started to notice that many retailers appeared to have given up years earlier. Yet the move to close down every single store in America still came as a shock to most industry observers.

Speaking on condition of anonymity, a CEO of one major retail brand remarked “I would have thought that the fact that 90% of all shopping is still done in physical locations would have been enough to warrant keeping at least a few stores around. I guess I was wrong.” Former Texas Governor Rick Perry, who was recently named Sears’ 13th CEO in as many months, seemed surprised as well. “Wait, most shopping is still done in stores? I guess maybe we should have worked on making our stores better rather than thinking that closing them down would somehow make things better? Oops.”

Jeff Bezos, CEO of Amazon, the brand that has benefitted the most from consumers’ growing love of e-commerce, was approached for comment after delivering his keynote at the annual World Hyperbole Conference in Geneva, but would not speak to reporters. He was, however seen high-fiving Elon Musk off stage and doing what some described as a “clumsy Irish jig” upon learning the news.

Other industry veterans were more circumspect. Ryan Gozzi, a prominent Wall Street analyst who has been pushing many retail brands to shutter locations to improve profitability, commented “honestly I think this just goes too far. I always envisioned retailers would cut and cut until they had just a handful of stores that did like $15,000 per square foot, you know like Warby Parker, Bonobos and Birchbox.” When asked what he thought of today’s announcement Ron Johnson, who oversaw a failed attempt to re-invent JC Penney, looked earnestly into the interviewer’s eyes and exclaimed “Apple. Apple. Target. Apple. Target. Apple. Apple,” then added “golly that’s big news. I was only able to decrease Penney’s sales by about 40%. So signing up for destroying 100% of sales is truly transformative. Gosh I’m impressed.”

The complete shut down of all stores comes after many retailers had aggressively explored new strategies to revive their fortunes. According to multiple sources, newly appointed Macy’s CEO Jeff Gennette recently presented his Board with a bold plan to turn the storied retailer around. The strategy, developed with a team of 2nd year Wharton MBA students, was designed to transform the Macy’s culture and incorporate many of the components that have allowed so-called “digitally native” brands to grab market share away from traditional player while transferring billions of dollars from venture capitalists to consumers without anyone apparently noticing or caring.

The new plan reportedly called for the company to relocate its headquarters to a loft-building in the Pearl District of Portland where employees would receive complimentary Stumptown Coffee and Voodoo Donuts, in addition to an enhanced benefits package. Reports that corporate staff would be required to bring their dogs to work could not be independently confirmed. According to multiple sources, sales associates were to be re-named “customer service sensei’s” and the company would guarantee 15 minute delivery of any product anywhere in the continental United States for free. Initial plans also called for consumers to receive 1,500 Plenti points with every order over $50 but were dropped when research revealed that no one knew what Plenti points were.

According to insiders the plan hinged on four key elements:

  • Liberal use of the words “disruptive” and “transformative” in conversation, written communication and speeches at analyst meetings and conferences.
  • Getting on the cover of Fast Company.
  • A willingness to lose a cumulative $27 billion over the next 10 years.
  • A miracle happening in year 11.

The Board was reportedly initially intrigued, but the strategy lost support when one member pointed out that the plan was mostly just a description of Amazon’s strategy and that nothing was being done to improve the products Macy’s sold or the actual shopping experience. Ultimately a growing malaise crept over the Board despite plans to hold their Board dinner that evening at Masa. According to one long time Macy’s Director “while we were excited to dine together that night at arguably the best sushi restaurant outside of Japan, we couldn’t get past the realization that when it came to our business we had nothing. Absolutely nothing.”

While today’s announcement would seem to doom many once leading brands to the retail graveyard, some believe Walmart might come out ahead. The Bentonville, Arkansas based company recently began aggressively acquiring online-only brands in a bid to become “more customer relevant and digitally savvy.” Sean Spicer, Walmart’s newly appointed VP of Cash Incineration Initiatives, told the Wall Street Journal that the shuttering of all physical stores only validated what Walmart has been saying all along and that anyone who says otherwise is either stupid or lying. Challenged on that remark Spicer added: “Hold on, hold on, hold on. We’ve always maintained that the future of retail is selling cheap stuff that Americans need, shipping it to their house, losing money on every order and making it up on volume. If you can’t see that you haven’t been paying attention.” He then told reporters to direct any further questions to the Justice Department.

The economic impact of closings tens of thousands of stores and putting hundreds of thousands of people out of work remains unclear, but many were concerned it could lead to a recession. It also cast serious doubt on President Trump’s claim that ‘we would be winning so much we would get tired of winning.” Prior to today’s news a recent Gallup survey confirmed that most Americans weren’t remotely tired of winning.

Many commercial real estate investors also expressed concern that billions of square feet of vacant retail space coming on the market all at once would have a depressive effect on rents. Despite this widely shared belief, General Michael Flynn, recently named President of the Association for Commercial Real Estate Over-Capacity Denial” noted that the industry had gone through multiple down cycles over the years and that any excess supply would quickly be absorbed. “For every Home Depot or Target that closes there are plenty of Soul Cycles and expensive juice bars with that one employee awkwardly standing there to take their place” Flynn said.

 

For real stuff please follow me on Twitter and @Forbes

 

 

 

 

 

 

Digital · e-commerce · Omni-channel

An inconvenient truth about e-commerce: It’s largely unprofitable

The disruptive nature of e-commerce is undeniable. Entirely new business models are revolutionizing the way we buy. The transformative transparency created by all things digital has revolutionized product access, redefined convenience and lowered prices across a wide spectrum of merchandise and service categories. The radical shift of spending from brick & mortar stores to online shopping is causing a massive upheaval in retailers’ physical footprint, which looks to continue unabated.

But the inconvenient (and oft overlooked) truth is that much of e-commerce remains unprofitable–in many cases wildly so–and many corporate and venture capital investments have no prospect of earning a risk-adjusted ROI.

While it was once thought that the economics of selling online were vastly superior to operating physical stores, most brands–start-ups and established retailers alike–are learning that the cost of building a new brand, acquiring customers and fulfilling orders (particularly if product returns are high) make a huge percentage of e-commerce transactions fundamentally profit proof. Slowly but surely the bloom is coming off the rose.

Despite the hype–and a whole lot of VC funding–it’s increasingly clear that most of pure-play retail is dying, as L2’s Scott Galloway lays out better than I can. We have already seen the implosion of the flash-sales sector and the collapsing valuations of once high-flying brands like Trunk Club and One King’s Lane. Just the other day Walmart announced it was acquiring ModCloth, reportedly for less than the cumulative VC investment. A broader correction appears to be on the horizon and I suspect we will see a number of high-profile, digitally native brands get bought out at similarly discounted prices. And, ironically, we will continue to witness a doubling down of efforts by many of these same brands to expand their physical footprints, some of which is certain to end badly.

The challenges for traditional retailers and their “omni-channel” efforts are even more vexing. Walmart, Pier 1, H&M and Michaels are among the many retailers that have been criticized for their slowness to embrace digital shopping. Yet I suspect their seemingly lackadaisical approach owes more to their understanding of e-commerce’s pesky little profitability problem than corporate malfeasance. Alas, more and more retailers are increasing their investment in online shopping and cross-channel integration only to experience a migration of sales from the store channel to e-commerce, frequently at lower profit margins. Moreover, this shift away from brick & mortar sales is causing these same retailers to shutter stores, with no prospect of picking up that volume online. The risk of a downward spiral cannot be ignored.

Given the trajectory we are on it’s inevitable that more rational behavior will creep back into the market. But with Amazon’s willingness to lose money to grow share and investor pressure on traditional retailers to “rationalize” their store fleets, I fear it will take several years for the dust to truly settle.

In the meantime, e-commerce continues to be a boon for consumers and a decidedly mixed bag for investors.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts here.

 

Being Remarkable · Growth · Retail

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.

 

 

 

 

Growth · Luxury · Omni-channel · Retail

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.

 

 

Being Remarkable · Customer Experiece · Customer Growth Strategy · Frictionless commerce · Holiday Sales · Omni-channel · Winning on Experience

Omni-channel’s migration dilemma: Holiday edition

Last year I wrote a post about what I called retail’s “omni-channel migration dilemma” wherein I observed that while the deployment of so-called omni-channel strategies–i.e. making it easier for consumers to shop anytime, anywhere, anyway–improves the customer experience immensely, the outcomes for most retailers were, thus far, not quite so wonderful.

At the heart of this argument were three core points:

  • With few exceptions, omni-channel retailers’ total revenues remain essentially flat, meaning that robust growth online is mostly cannabilizing brick & mortar sales;
  • In many cases, the profitability of e-commerce is actually worse than a physical store sale. This is particularly true for lower transaction value players like Walmart and Target.
  • In their quest to become “all things omni-channel”, retailers are investing enormous sums–and in some cases–getting distracted from arguably higher value-added activities.

You don’t have to be a math whiz to understand that spending a lot of money to end up–if you’re lucky–with basically the same total revenue at a lower margin is not exactly a genius strategy. But this is where we find Macy’s and many other retailers right now.

The omni-channel frenzy around the holiday shopping season only shines a harsher light on the issue. By launching sales earlier and earlier, by pushing deep discount events like Cyber Monday and by offering free shipping pretty much throughout the season, the tilt toward online sales is exacerbated and margins continue to shrink. Consumers win through great deals. And retailers lose, as overall sales are likely to go absolutely nowhere.

Now some have argued that omni-channel is ruining retail. They are wrong. They’re wrong not only because it is pointless to fight reality, but also because efforts that are fundamentally rooted in the desire to improve the customer experience are rarely misguided. The key is not to confuse necessary with sufficient, nor “the what” with “the how.”

So we should not get distracted by analysts who try to extrapolate one or two days of sales as part of some trend.

And we should bear in mind that online sales for most omni-channel retailers remain far less than 10% of their total business. So even healthy e-commerce growth is not likely to offset seemingly small declines in physical stores sales. You don’t have to trust me on this. Do the math.

But mostly we should remember that the story is not about all things omni-channel, nor what happens on Black Friday, Cyber Monday or the few weeks that comprise the holiday shopping season.

It IS about which retailers are breaking through the sea of sameness with remarkable product AND a remarkable experience. It is about which retailers are eliminating friction for the consumers that matter the most in the places that matter most. It is about which retailers are eschewing one-size-fits-all strategies in favor of a “treat different customers differently” philosophy. It is about retailers that know where to focus and how to properly sequence their omni-channel initiatives, not blindly chase everything some consultant has pitched them.

Clearly, the future of omni-channel will not be evenly distributed.

Don’t be blinded by the hype.

Customer Growth Strategy · Innovation

Small is the new interesting

It’s been at least 20 years now that most value creation in retail has been driven by big. Big stores–both physical and digital. Big assortments. Big advertising.

Walmart and Target. Home Depot and Lowes. Amazon and eBay. Best Buy, Ikea, Office Depot and on and on. Superstores, category killers and the “endless aisle” online guys have won big (heh, heh) on scale, efficiency and low prices.

There’s a lot to be said for pushing the frontiers of big. When your goal is to be the “we have everything store” your marching orders are pretty clear. When you have to be the winner in a price war, your focus is obvious.

The problem is that big has its limits. And a closer examination of many “winning” retailers’ strategies reveals that big is losing momentum.

It turns out that a strategy of big eventually faces diminishing returns. It turns out that most of the winners of the past decade or so are running out of new stores to build. It turns out that many of the mass promotions that drive incremental business lose money. It turns out that for most of these brands e-commerce growth is unprofitable. But mostly it turns out that big is boring. And consumers are starting to notice.

There’s no question that big is here to stay. There’s little doubt that for many consumers–and a vast number of purchase occasions–the quest for dominant product selection, convenience and great prices will remain paramount. But that doesn’t mean that’s where the future opportunities lie or that your strategy shouldn’t shift.

Shift happens. And it’s a shift away from mass marketing to becoming more personalized. Away from overwhelming assortments to editing and curation. Away from products that everybody has to items and experiences that the consumer creates. Away from the seemingly inevitable regression towards the mean to a deliberate choice to eschew the obvious and explore the edges.

Many brands will have a hard time breaking out of the pursuit of big. They are too vested in building scale, too scared of Wall St.’s reaction to a strategy pivot, too addicted to mass advertising.

Of course, therein lies our opportunity. Maybe it’s time to embrace small while the rest of those guys continue to flog big.

back-to-the-1970s-lets-get-small

Being Remarkable · Branding · Digital

Creating meaning at scale

In case you haven’t noticed, there is a whole lot of bifurcation going on. And in many markets, the middle is all but collapsing.

bridges_down_01

At one end are the Walmart’s, the Home Depot’s, the Amazon’s–the low price, vast assortment guys. Their pitch is easy to understand. We have just about everything you could possibly want, virtually anytime you want it, at the low, low price. Operationally this is incredibly difficult to scale. But from the customer’s perspective, it couldn’t be more simple to grasp. Dominance and value (defined by price) creates meaning.

At the other end of the spectrum are the brands built around market niches, product differentiation and the somewhat intangible “brand personality.” What defines meaningfulness here is built on deep customer insight, emotional connection and, more and more, the ability to treat different customers differently.

Historically, luxury brands thrived by merchandising exclusive products in spectacular settings delivered face-to-face by well-trained sales associates. To the extent companies could replicate this model as they added stores, they could continue to create meaning and deliver it at scale. Yet, as all things digital become increasingly important, the notion of what constitutes a meaningful one-to-one “luxury” relationship is being challenged.

The best specialty stores have succeeded by curating merchandise for a particular “lifestyle” and presenting it in a distinctive environment that reinforced a unique brand image. These companies created a business model that was simple to replicate and led to the ubiquity of many of these brands in affluent malls and upscale shopping areas of most major cities. Now, with product choice and availability exploding and new micro-niche brands emerging online, the concept of “specialty” is being redefined.

The hyper-growth, venture-backed “pure-play” brands that have launched over the past few years–think Gilt, Bonobos, Warby Parker–found it comparatively easy to scale at first. They exploited many of the advantages of a direct-to-consumer model and employed low-cost acquisition techniques to build an initial base of customers–what I like to call the obsessive core.

But it turns out that creating meaning at the scale that will lead to profitability isn’t so easy (or economically viable). Too many newer customers of these high-flying brands have started to equate meaning with discounts. Others, it turns out rather predictably, need the meaning that comes from a physical presence to derive theirs. Many see this hybrid-model as an exciting new area of growth. Others see it as clear evidence that most e-commerce only brands are finding it very difficult to deliver meaning at scale.

In an anything, anytime, anywhere, anyway world, it’s getting harder and harder to break through the clutter, to win the battle for share of attention, to create the all essential meaning that matters for customers.

If you seem to be stuck in a sea of sameness, selling average products to average people, relentlessly promoting just to stay even, it’s time to get off the bridge. The collapse is near.

If your customer is choosing you mostly on price, you had better be the low-cost provider. Otherwise you will lose the inevitable race to the bottom.

If you believe you have the ability to be meaningful to a well-defined set of customers who choose you over the competition for specific, sustainable reasons, good on you.

Just remember, as Bernadette reminds us, it’s not so easy to create meaning at scale, particularly if you need that scale to stay in business.

Brand Marketing · Customer Growth Strategy · Customer Insight · Growth · Marketing

The discount ring

I’m amazed that Wall Street analysts are “surprised” that as hot brands get bigger (think Michael Kors, kate spade), their level of discounting increases. Apparently they were all sleeping during their first year economics course when supply and demand was covered.

Target_market_bullseye

 

 

 

 

 

Whether it’s Walmart or Chanel, at the center of any brand’s customer bullseye will be customers who don’t need a discount (or any extra incentive) to buy. This is what I referred to in my recent obsessive core post. As we move out in the rings, away from the center, we encounter customer segments that are less and less intrinsically loyal and thus more in need of extra incentives to buy.

Since Walmart’s value proposition is largely about price–whereas Chanel’s rests on a high percentage of full-price selling–the composition and dynamics of these various customer segment rings will obviously be quite different. But the fact remains that as a brand grows by casting a wider net for customers it will, at some point, develop a discount ring.

As the name implies, customers in the discount ring don’t buy unless they get a deal. In fact, most brands will have multiple discount rings. There will be a ring that needs only minor or modest incentives to pull the trigger. Others only come off the sidelines when prices hit a much deeper level of markdown (or some other incentive).

Unless we are examining a brand that has decided strategically to shun price discounting completely–or assessing certain companies early in their life-cycle–the existence (and relative growth) of a discount ring should surprise no decent analyst.

The real question for anyone trying to understand the validity of a brand’s long-term customer growth strategy is whether the company has a firm grasp of the dynamics within each of these rings and is intelligently balancing the portfolio of these different customer segments.

Coach is a brand that in recent years lost its grip on its customer portfolio and pushed too far on the discount ring. They have paid a steep price and are now trying to rebalance.

In Michael Kors’ case, there are only so many customers willing to pay at or close to full-price for their core offering. Sustaining growth means appealing to more customers. And that means they will need to become more reliant on more price sensitive customers.

Ultimately the point at which the discount ring becomes meaningful is mostly a matter of brand maturity and math. If you get shocked by that it just means you’re not paying attention.

The starting point–the pivotal matter of strategy and intelligent customer development–is to build a level of deep insight about each relevant customer segment. Then we must become intentional about how each plays into the brand’s long-term growth. Having a discount ring emerge is not automatically a matter of good or bad. How it plays out over time is a strategic choice.

Choose wisely.

Being Remarkable · Retail · Winning on Experience

Sears: The world’s slowest liquidation sale

“I see dead people…they only see what they want to see.  They don’t know they’re dead.”

– Cole Sear in The Sixth Sense

There probably was a time when Eddie Lampert honestly believed that Sears and Kmart could be resurrected as competitive retailers. But the concept of putting together a mediocre (and declining) department store, with an also-ran to Walmart and Target, was failed from the start.

In the intervening nine (!!!) years, Lampert has never once articulated a strategy for fundamentally improving the value proposition of either brand that made any sense.

On the contrary, he organized product and business unit teams into “competing” merchandise categories despite overwhelming evidence that consumers wanted more integration, not less. He required that every individual product earn a competitive ROI when every winning retailer on the planet understood the notion of category management and market-basket profitability. He starved both nameplates of capital when each was already woefully behind best-in-class competitors. He cut expenses to the bone when it was clear that both Sears and K-mart had a revenue problem, not a cost problem. He closed dozens of stores, further exacerbating both brands’ lack of critical mass in many markets.

Of late, he’s been pushing two ridiculous notions. The first is the idea that Sears is becoming a “membership” company. Please. This is mostly a transparent customer data grab. The value proposition of “Shop Your Way” is weak and the idea that being a member conveys any real sense of brand loyalty, engagement or fundamental profitability would be laughable if the whole endeavor weren’t so sad.

Crazy Eddie’s other big idea is transforming Sears into an “integrated digital platform.” For this to work you have to believe that Sears can compete effectively with Amazon–not to mention a whole host of leading multi-channel retailers–or that you can somehow win in an omni-channel world with a crappy, declining and shrinking brick and mortar base. Both defy basic logic.

Whether Lampert is delusional or not remains irrelevant. Whether by design or desperation, Sears has been liquidating for years.

Sears can certainly create liquidity for a bit longer by continuing to off load assets. But any realistic hope that Sears can pull out of this dive has, sadly, long since passed.

Dead brand walking.