Are You Trapped in the Past?
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\"RRThink you are a Retail Guru? Student of the Industry? Current or former Master or Mistress of the Universe? Or have you just been around the business for at least 25 years? Well, wherever you were in 1989, were you capable of foreseeing what retail would be like in 2014? Some of you who were part of the industry in 1964 may in fact still be alive and kicking. If you are a member of that rarified group, did you envision then any of the changes that have occurred in our industry over these past 50 years?

Change is a concept that most of us say we understand and readily embrace. Yet, in reality, we have little or no capacity to conceive of, plan in support of, or manage change.

Past as Prelude

In 1964, retail was principally focused on downtown business districts in either overlarge emporium like local department stores and/or mega-catalog houses. Downtown specialty retail was invariably local. Few, if any, shopping malls existed; there were no strip or power centers, and no big box players or discounters of any consequence. Local city-based Woolworth’s and Woolworth-like stores that blanketed downtowns were more the norm throughout the country. Technology then was embodied by mechanical cash registers in the front of the house and manual comptometers and handwritten ledgers in the back room.

\"RRIn 1989, retail was driven by regional department stores held together by inconsistently organized national confederations, national and regional discounters, big box and specialty players and, to a smaller degree, the surviving catalog houses, also doing business in their own brick-and-mortar stores. Malls, strip centers, and power centers abounded. Downtown Central Business Districts continued to go dark as the migration into suburban communities played itself out. Almost all retail business was done over the counter with some residual mail and phone commerce taking up the slack. National brands were dominant while some effective private label products were present from both catalog houses and newly powerful specialty retailers.

The Ubiquity of Change

Today in 2014, the department store genre has essentially disappeared with one last man standing, along with a handful of mostly regional cohorts. The regional discounters are basically gone. Many of the big box specialists are gone. Suburban malls, other than the ubiquitous A and B tiers, have become increasingly problematic as centers of retail activity. Sears and K-Mart are on their deathbeds while Walmart and Target struggle to find a viable foothold for the future. JC Penney, that bastion of the middle market, remains in intensive care, while its principal nemesis, Kohl’s, another last man standing, finds itself stuck in a rut all its own. And then, of course, there is the Internet and that scourge of traditional retail, Amazon, and all of the tens of thousands of Amazon-like businesses that have emerged. Yes, Internet sales are only 13% of the retail pie. Yes, customers still like to touch and feel and transact in stores. But Internet sales continue to show compound growth at high single/ low double digit rates while traditional brick-and-mortar sales barely grow at all. To tell the truth, brick-and-mortar sales at most legacy retailers have been in serial decline for years.

\"shutterstock_150850907\"Are You Changing Fast Enough?

So if you are in fact a Retail Guru, a Student of the Industry or a Master or Mistress of the Universe, how capable are you of acknowledging the changes that have taken place in our industry? More importantly, if you are in a leadership position, are you capable of envisioning what the retail industry will look like 25 years from now? Do you realize how important it is to anticipate the future and chart a path for your organization’s success? If you are prescient enough to consider the changes that will likely occur, then are you capable of blueprinting the strategies your organization will need to succeed in the future?

  • Do you have the force of will and leadership skills to manage those changes?
  • Do you have the courage to close substantial numbers of stores that have lost their four-wall productivity and fully embrace the omnichannel expectations of your customers?
  • Do you have the capacity to reinvent your assortments to better match what you sell and how you sell those assortments with newly emergent competition that has begun to take away your market share?
  • Do you have the ability to reassess the skills your organization will require to move away from, finance centric “deal” makers to style and quality centric “product” experts?
  • And are you capable of delivering customer service that fully satisfies customers’ expectations?

\"shutterstock_145160653\"Customers Calling the Shots

In 2014, customers have fully embraced transparency, real-time availability, unlimited access and unfettered value. They want to participate in retail entirely on their own terms. They expect great products. They expect great prices. And they expect to transact in a manner convenient to them, not to their retail partner. They have no use for shoddy stores that offer little or no service, just as they have no use for poorly architected web sites.

They have long ago lost the loyalty driven behaviors of their parents. Ask a group of 25-30 year olds how often they shop in a department store, and they look at you like you are nuts.

For them, the more appropriate question is “do they ever shop in a department store?” Ask them what merchandise they are reticent to consider purchasing over the Internet and the answer is typically, “Nothing!” Ask them about their affinity for brands and they respond favorably, but that affinity is often very short lived. Do they appreciate the physical experience of shopping? They do. But they feel no compelling need to actually transact in a store.

The Shape of the Future

In 2039, 25 years from now, baring some worldwide calamity, there will be no shortage of customers. And it is almost a certainty that those billions of customers throughout all corners of the world will continue to embrace that fundamental trait that humans hold dear—the acquisition of things well in excess of their needs. Brands will likely remain important. But it is quite likely that few of today’s brands, especially below the luxury level, will remain. Hierarchies of status will most definitely continue to be important. Pursuit of value may very well endure (though its hard to believe that today’s level of discounting can be sustained).

The question, of course, is what will our marketplaces be like? Who will be our retail providers? Will all retail be transacted on a direct to consumer basis, or will aggregators like department stores and discounters remain in operation? How much business will take place in a conventional store where customers touch and feel, and then walk out with their choices—versus selections made remotely on some form of personal device, then delivered directly? Probably delivered by Jeff Bezos’ drones rather than those ever present UPS/ FedEx and USPS trucks.

Change or Die

Change and change management is the most exquisitely difficult leadership challenge that exists. Unhappily, most of the people I’ve worked with, and for, have had little to no capacity or interest in that regard. Yes, every CEO you ask promptly and emphatically will claim to be fully supportive of change. But then asking a CEO about their views on change is like asking them to admit that they yell at their kids, drive too fast, and maybe even cheat at golf. Most top retail executives today find it all they can do just to protect their status quo.

Protecting the status quo is how many of them got to their positions in the first place, and it’s also how most maximize their compensation. The reality is, however, that the status quo is not sustainable. It never has been. Change is a force of nature in the consumer and technology space that retailers occupy, and today, change, occurs at an increasingly rapid pace. Today’s retailers have no future if they are unable to defend and improve their place in the market. To remain viable in the future, their leaders must be prepared to alter course as dramatically today as the industry’s course has actually been altered in the past.

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