Happy Days Are Here Again. Oh, Really?

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\"rr_happy-days-are-here-again\"With a wink and a nod I felt compelled to use a musical metaphor, acknowledging America’s conflicting moods over the inauguration of our new president. And no, this is not a political statement. We’re all in a wait and see mode. But the headline is also nodding to an uncertain mood clouding the retail industry.

Regardless,  I do wish you Happy and Prosperous Holidays as we plow into the season.  And, what exactly are we plowing into: new happy days? Not to get metaphysical on you, but if we say “they are here again,” which happy days did we mean to compare with from the past?

If we choose to define happy days as a small bump in holiday sales growth over last year, that the happiness Pollyannas are predicting, then I guess we can be happy. But if we define the time as the wonderful era of happy days in retailing during the middle of the last century, then we are dismally reminded that that business happiness will never return. To achieve any level of sustainable happiness, what’s needed is a total industry reboot. And we’re experiencing that.

But forget about relativity, because nothing happening in this world today can be compared to any days of our past. Perhaps there are conceptual parallels, or echoes, but not replicas. And the distances and differences from past references have become wider and are unfolding faster. Just to add the frisson of feeling out of control, the technology rocket is streaming at warp speed, disrupting and destroying everything as we knew it.  Living in this age of technology demands that retailers continue to find a new course, innovative strategies and business models. And they need to do it quickly, at the risk of extinction.

Same-Old, Same-Old…or Worse?

Macro headwinds continue. We face 70 percent of GDP growth dependent on consumption, weighing against a perpetual increase in supply and trailing demand (the need for stuff), compounded by deflating prices. The result?  The economy will continue to lock into “secular stagnation,” a term coined by economist Lawrence Summers, who projects long term GDP growth averaging 2 percent a year. There are many other variables in his theory, including declining productivity and demographic shifts.  But the ongoing disequilibrium of supply and demand lies at the core of this stagnation. It is sobering to acknowledge that the retail industry is ground zero for this dismal forecast.

While this over-capacity condition is not new to the industry, the full-on effects of the new and increasing number of technology-driven models, along with new e-commerce sites emerging every five minutes, add to the supply problem. It’s further exacerbated by the dominant cohort of younger consumers, raised on technology and hungering for life’s experiences instead of stuff. In fact, young consumers are having a halo effect over older consumer groups, so combined, their demand for change is accelerating.

Technology and shifting consumer interests continue to destroy the paradigm of retail past. Physical stores and malls continue to take a hit. Traffic continues to drop, as do in-store sales, while online sales continue to soar. It’s impossible to predict where the shift from physical to digital will settle. Therefore, adjusting and aligning assets and strategies accordingly is more of a defensive, reactive process, versus a proactive and assertively managed plan.

Furthermore, as the reactive, complex and enormously costly transformation to an omnichannel retail model continues, while promotional pricing accelerates as a weapon of necessity to survive in an industry with overwhelming excess, profitable growth is hardly achievable.

Finally, Amazon and all the entrepreneurial little Amazon wannabes, just add more fuel on an already raging bonfire.

 Winning Strategies Amidst Unpredictability

So what can retailers do to control their own destiny – and succeed in an environment where the new normal is unpredictability?

There are strategies for success that will prevail regardless of unpredictable events. Those strategies emanate from, and focus on, consumers. And they are applicable for both online and off.

First, brands and retailers must understand new technological tools, and how they can best be used to add value for consumers: data and predictive analytics; artificial intelligence, machine learning and algorithms; augmented reality; apps; interactive touchscreen or hand gesture devices; digital pay; internet of things and more.

In the face of market unpredictability, emerging consumer tends, and retail institutions living in uncertain times, here are my strategies to win:

  • Personally engage brand loyalists during each step of the journey.
    New customer acquisition is costlier and less profitable than incenting loyalists to buy more and more often. Use big data and predictive analytics to profile each consumer (or finite consumer niches) to personalize marketing down to the individual. Engage before the customer journey through social media, influencers and laser targeted ad media and blogs, sending personalized messages and offerings. Personalize during the shopping phase using beacon technologies and message to upsell, cross-sell and offer special promotions.
  • Develop personalized co-created experiences.
    Memorable experiences require mastering data analytics and tools to identify consumers’ expectations of the brand. A co-created personalized experience is one in which the consumer proactively shares participation. Examples include these scenarios:  A consumer scans a Burberry sweater’s barcode that triggers a video of the designer narrating the story of its inspiration and creation. Or, a consumer provides personal profile to Stitchfix to receive personally-curated selections on a scheduled basis. Another: a consumer proactively participates in Lululemon’s yoga classes while another provides her personal profile to Amazon and receives personalized and predictive offerings. And a consumer might proactively engage with Apple’s T-shirted geniuses, co-creating an experience. Each experience is shaped to the consumer’s mood at the moment, making it unique each time, thus, compelling the consumer to return more often. Co-created experiences increase the value of the brand, store or website, and provide pricing power in an industry in which pricing power is an oxymoron.
  • Lionize the position of sales associates.
    Invest in training and compensating the most important link in the value chain: your sales team. It touches the consumer at POS, either online or off. The entire customer personal experience is not complete and cannot lead to purchase without strong sales associates. They must be armed with the personal profiles and desires of each customer, as well as the technology for quick product search and checkout. Most importantly, they must be a personal extension of the retail brand.
  • Maximize associate/customer engagement.
    Identify peak shopping hours and staff up accordingly. (RetailNext estimates sales increases of 6 to 8 percent when the number of associates are properly scheduled.)
  • Create omnichannel synergies and a third-party platform.
    Identify loyalists who shop and order online, but pick up in store (BOPUS) and send them incentives that are redeemable in the store. Redefine physical stores for shopping or shipping.  Reposition them as distribution platforms, leasable to other compatible brands and retailers. Define under- or weakly-performing space and replace it with new and innovative products or services such as salons or restaurants. Acquire brands that will create a synergy (Nordstrom’s/Bonobos, Walmart/Jet.com) complimenting and adding impetus to growth. Or, eliminate the spaces that underperform and drag your brands down.
  • E-commerce “pure plays” open physical stores.
    Amazon and other e-commerce brands that understand the synergy created by the omnichannel model, as well as the experiences and human engagement that draw consumers, will open physical stores.  Put another way, if they do not, they will be at a competitive disadvantage in the future.

A New Paradigm

Do you remember the mantra of the old world of merchant princes? It was location, location, location and product, product, product.

The new mantra is personalize, personalize, personalize and entertainment, entertainment, entertainment.

The store and the website are the stages to perform your magic and serve as platforms for distribution. Move quickly into this new paradigm and happy days will be here again, and will last well past the next presidential election.

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