October 6, 2014

                                      WHAT’S REALLY WRONG WITH RETAIL?

            Where should I start?

             Best Buy is bombing out. They should think about changing the name to Better Buy as in “better buy somewhere else that’s gonna be around for the next few years” just in case you need them. It’s morphed into a bunch of mini-showrooms for the mobile phone and computer companies and a hands-on demo facility for Amazon shoppers who want to handle the goods before they order online. The increasingly random product mix and the way they change their in-store locations so often make it almost impossible to find anything.  It’s like a torture maze designed by Conan the Floor Planner. Basically, they’re spread a mile wide and an inch deep trying to be all things to all people and to have a little bit of everything for everyone and it’s an impossible mission.

           The concept of the long tail works – but only in the virtual world - for a simple reason. The web permits infinite inventory which no one in the real world has the cash, the resources or the shelf space to replicate in terms of its breadth or depth of available alternatives and choices. This is one of the main things that killed Blockbuster. Back in the day, we used to call them “Boxbuster” because they stacked tons of empty VHS boxes all over the store to make you think that they actually had something  in stock that you wanted to rent (like a hot new hit film) once you asked for it. But when you did ask, nada.    

          Sears/Kmart (remember Sears?) is also sinking like a stone and they just cut Lands’ End adrift for no greater or more apparent reason than they gave when they bought it in the first place.  It was a desperate attempt to move upmarket and it went nowhere. Saying doesn’t make anything so – you’ve actually got to change your actions in order to change your culture and to change the public’s perception of your position in the market. This stuff doesn’t happen overnight even if you’re actually committed to making it happen which is somewhat of an open question in Sears’s case. Similar attempts to reinvigorate and modernize their sub-brands like Kenmore and Craftsman have also been stillborn. Sears is a proud and historic brand, but it’s probably just history these days. Some things are beyond redemption or salvation. Shopping at Sears is a chore and today no one’s looking for more work.

          And Radio Shack – the original store for geeks, model makers and operators of all sizes and shapes - is a wreck in the midst of the greatest boom in demand for technology and gadgets in history. If anyone had a chance to naturally migrate their business from hobbyists and Trash 80s to the big time in computing devices, it was these guys and they basically got rolled over by everyone else. In addition, with the whole world moving from analog to digital, they completely missed the movement from physical “kits” to digital everything. The Maker movement was their last best shot and they never even stepped up to the plate on that one. At this point, someone just needs to tell these guys to lie down because they are badly burnt toast.

          Sears is in no better shape than Radio Shack. Nothing’s worked since the Kmart deal. Kmart buying Sears was like taking poison to get even with your enemies and expecting them to die. It’s another case of identity loss. Walmart (480B) owns the low price position. You could make an argument that Target (73B) owns the middle-class style and fashion spot although probably not for long – way too many new players moving into that space – and there is no more fickle class of consumers than their targets. And Sears plus Kmart (36B) owns nothing. They have no direction, no passion and no soul. Everything they do these days is short-sighted – it’s like wetting your pants in a dark suit. It gives you a warm feeling for a little while, but no one else notices.

          How did it happen? First and foremost, they all got caught to varying degrees in the muddle in the middle. Or maybe in the middle of the muddle. Today to compete effectively you just can’t be beige or average and their stores and their offerings were basically “so what” in every possible category. If you don’t stand for something in the consumer’s mind and carve out a demonstrable and defensible niche, you’re nothing. You can’t save yourself with advertising, promotions, coupons and circulars – these days any kind of “brute force” spray and pray advertising (regardless of the channel) is just the unavoidable cost of being boring. And the proof of the pudding is that there are still companies getting it right. Interestingly enough, they are also still way too reliant on the old-fashioned techniques, but their in-store chops are second to none.

            Maybe the best example today is Costco which has clearly figured a bunch of this stuff out. And considering that they started 20 years after Walmart which is the 800 pound retail gorilla, it’s impressive that they are doing more sales today (109B) than Target and Sears combined. What exactly do they know that the others don’t and why is it important to your business as well?

(1)   Family Fun - They’ve made it fun for the whole family (even Dads) to go shopping again. They’ve made it an adventure (instead of a chore) to hit the store and see what’s new. They get that we’re deep into the Entertainment Economy where every environment needs to be immersive, informative and engaging. And they have figured out that the main reason that all the stats suggest that the lion’s share of typical consumption decisions are controlled by Moms is because the Dads aren’t there most of the time when the shopping takes place. Once you add Dad back into the equation, the average spends of trips where two parents are present (rather than just Mom) increases by more than 40%.   

(2)   Here Today, Gone Tomorrow - The guys who run Costco are also masters of FOMO – Fear of Missing Out. Every other big box store tells you that they have unlimited quantities of everything to convince you that they will never run out of what you’re looking for. Costco convinces you every week that it’s your very last chance to grab that item or you’ll never see it again. Why else would you buy your Xmas decorations in the middle of October? It’s because you sincerely believe that, if you don’t, you’ll be totally screwed, your family will gleefully remind you of what you missed out on for months thereafter, and you’ll be the only one on your block who didn’t grab the goods while the gettin’ was good. 

(3)   Run and Gun - They also understand that we all live in a world where IG (Instant Gratification) is the name of the game. I want what I want and I want it now. And they don’t leave these things to chance or to even the smartest computers. They know that, while you’re waiting in the checkout line, you’ve got next to nothing to do and that’s when their super-salesmen descend with their scanning guns to check out the contents of your cart and let you know how much you will be saving – right then and there – if you switch up to a higher level of membership. In fact, if your order is big enough, you might even come close to covering the annual bump in the membership cost while you’re just standing there and – for sure – if you’re a regular volume shopper, you’ll be miles ahead of the game in just a few weeks. It’s easy, it’s true, and it’s right there – right now.

          The moral of the story is pretty clear and simple. The expectations of consumers and customers are progressive – to hold their attention and their affection, you’ve got to keep making every new visit an adventure and an experience. If you don’t, they won’t be your customers for long.


PS: “You Get What You Work for, Not What You Wish for”   

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