Recent news headline: Retail CEO announces that luxe retail is the new normal.
Another recent news headline: Real estate empresario comments on how overbuilt and expensive New York City has become. We were, of course, shocked to learn that real estate was expensive here. Any fair-minded observer can be forgiven a moment of disgust as these particular twin revisionist rationales work to fling more pixie dust on the legitimate question we face, Whither retail reality?
It\’s not all Covid all the time. Think of the forced march to department store oblivion we\’ve witnessed since B. Altman\’s, Gimbels, A&S, and Bonwit Teller faded from view. Then, more recently, Barney\’s, Henri Bendel\’s, JC Penney, K-Mart, Sears (sold for parts), and Lord & Taylor. Then, of course, the unrelenting retrenchment and demise of specialty retail; too numerous to mention, but recall these brands momentarily saved from the dustbin of commercial history: Abercrombie & Fitch, Aeropostale, American Apparel, Ann Taylor, Brooks Brothers, BCBG and on and on through the shopping arcade\’s alphabetized soup.
[callout]The drive for quarterly earnings growth among publicly traded retail can be said to be the modern-day version of a legendary and villainous tale: The Simon Legree of the Street flogging storied retailers to death.[/callout]
Why? Did we stop needing great goods beautifully merchandised, profoundly understood by sales professionals and tailored to the specific needs of their customers? No. Did we stop enjoying shopping, even before it became a life-threatening activity? Well, yes, actually. It\’s fair to ask why.
Our research work has showcased three core drivers of retail devolution as understood by the shoppers who have had to chart their courses through shifting currents and gravitational pulls of price promotion (to the consequent eradication of knowledge and service); deification of omnichannel marketing in pursuit of convenience (and consequent eradication of human-to-human service); and industry\’s abject refusal to honor the basic dictum, \”think global and act local\” (and consequent eradication of personal service and community understanding).
1. The Gravitational Pull of Price Promotion
The drive for quarterly earnings growth among publicly traded retail can be said to be the modern-day version of a legendary and villainous tale: The Simon Legree of the Street flogging storied retailers to death in order to shake their faith in their once sacred mission as purveyors of fine goods at a fair price to people of goodwill.
The retail story has been reframed by an idiot (a series of them) full of sound and fury and signifying a seemingly pathological pursuit of decline, propped up by a rotating flurry of balance sheeted shiny objects that distract and bean-counter chicanery that deposits more earnings from credit charge fees than margin. Sound harsh? Just look around you.
Retail, with its seasonal ups and downs and fleeting fashion-centric obsessions is simply not the stuff with which teacher pension funds, individual 401Ks and philanthropic trusts should be placing their monies. Done right, retail is still a remarkably mercurial way to run a business; done wrong, it is a Ponzi scheme in which new money is endlessly required to create an image of expansion and growth.
For the sake of argument, let\’s just say, it\’s been done wrong. In the flogging to death of a once-noble institution, it is the shopper who bore the first stripes of the whip, followed quickly by vendor partners and ultimately by hoodwinked investors. Why? The investment thesis appears to have been led by the dubious logic that we can move lots of volume at an ever-lower cost, while trimming the corners of the retail and personal service experience and it will look on a balance sheet just like growth.
2. Deification of Omnichannel Marketing
As Amazon began its triumphant storming of the already teetering bastions with its \”our way or the highway\” retail model, the dumbstruck denizens of those once-hallowed executive suites spent money not in finding a powerful and emotionally resonant compelling competitive advantage, but in consultants to show them how to try to become an Amazon without being Amazon. \”We need to be able to do e-commerce and meet the consumer at every touchpoint of the journey\” was the ubiquitous mantra. But did the world really need legions more digitized e-tailers to deliver the goods from wherever to wherever in two days?
What the consultants got were endless contracts to supervise, manage and then reboot the omnivorous omnichannel, eating money, time and effort while churning out digital wannabes. The retailer really got what it needed: an investment thesis to sell to the Street, encouraging it to hang on for a solution that was in hand.
What the shopper needed, however, was human connection and knowledgeable, credible advice from salespeople who knew both the goods and the shopper. Don\’t believe it\’s that simple? Consider please the restructuring of that value proposition by a well-funded coterie of personal stylists who have populated the void created by the systematic de-professionalization of the retail sales associate position.
That was the compelling, sustainable competitive advantage, and it was jettisoned, cost-carved out of a dumbed-down system that neither understood nor valued it.
3. Industry\’s Abject Refusal to Honor the Basic Dictum, \”Think Global and Act Local\”
While it is tempting to blame the acquisition and rebranding of local department stores, such as Liberty House and Marshall Field\’s to create a behemoth national brand, the loss of local retailers is chilling: Shillito\’s, Elder-Beerman, Lazarus, Carson Pirie Scott, Bullocks, I. Magnin, Wannamaker, Garfinkel\’s, Bon Marche, Foley\’s, Strawbridge & Clothier, Robinson\’s-May, Hecht\’s, Sanger-Harris, Burdines, Orbach\’s, Famous-Barr, Rich\’s — the list goes on and on and on and on.
Centralized buying created a one-size-one-style-fits-all mandate and with it, the specificity of the individual became a charming pentimento of mercantile history. Individualized personalized shopper experiences that moved us through the anticipation, pursuit, significance and appreciation of the acquisition of treasured brands through treasured brands became an extinct artifact. All gone and homogenized in pursuit of buying efficiencies that denude the retailer, the goods and the shopping experience of value and worth.
So, Now What?
One end of the retail teeter-totter pushes heavily on the one-percenters able to still procure their personal brands of luxury. The haves and the have-nots stand in stark contrast. Ironically, by the time we permanently emerge from our burrowed cocoons there may not be an upscale restaurant or gala benefit left to dress up for and showcase the luxe life. No worries, the elite jet set will have taken off in private planes to frolic elsewhere. Who best to fulfill their luxurious LV necessities? The department store or LVMH direct?
The other end dithers and hand wrings that real estate is expensive, perhaps too much so in the face of contagion, economic contraction and social justice contrition. Amazing that Neiman-Marcus committed to a 50-year lease in Hudson Yards. That deal went south with Neiman-Marcus in bankruptcy, which may take Bergdorf-Goodman with it. And worse, Neiman-Marcus no longer allow returns and refunds for merchandise which it never actually shipped to its once-loyal clientele, opting instead to make money at the rate of $19 a month interest on unpaid for (unreceived) cocktail shakers (a true [sad] story).
This miserable story of American retail\’s demise is a testimony to a hubristic tone deafness to legitimate human need. Addiction to growth at any cost blinded the industry to the power of its own premise and promise. And with that blindness has come heedless stumble after thoughtless stumble, accelerating and cascading now in the era of Covid into a freefall into oblivion.