Re-Inventing Retail: How So?

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In a World of Unprecedented Change

“A World of Unprecedented Change” is really an understatement, without a deeper understanding of the powerful dynamics driving such change and the fundamentally new retail models the change will lead to.  To begin, one must understand that it’s the best of times and it’s the worst of times, to borrow a phrase from A Tale of Two Cities by Charles Dickens.

Well, not really the worst of times.  But, we do have worldwide economic issues that are certainly having a negative impact on consumers’ discretionary spending and therefore, retailing. And, even in the emerging countries their growth it slowing. Another component of the negative headwinds, so to speak, and more so in the developed countries, yet also ramping up in the emerging economies, is the phenomenon of overcapacity: too many stores; too much stuff; competitive congestion.  However you want to describe it, this market environment results in the necessity for retailers to win share of market from competitors to grow, or what I like to call “share wars.”  Such a fiercely competitive marketplace has also accelerated the rise of the “all-powerful” consumer and their raising the bar on what it takes to satisfy their shopping and purchasing desires.

The final headwind, to stick with the metaphor, is the fundamental disruption across all industries brought on by the Internet and all of its contiguous technologies.  Yes, it is disruptive, game-changing, paradigm-breaking or however one chooses to label it. However, this headwind is also why we are living in the best of times.  Because, out of its disruption will come both destruction and creation.  Yes, it’s providing fundamentally new and innovative change to the retail game, or without which, one will lose the game altogether.

So, it is the best of times for those retailers who shift their focus away from the myopic short term tactical battle against sluggish economic headwinds, and day to day battles for share.  Rather, they need to embrace the “best of times,” its technologies and our truly “flat,” integrated world, and strategically disrupt their businesses to create new and innovative models.

New Rules for Growth

In my co-authored book, The New Rules of Retail, we define three new rules and how they can be implemented to provide such new and innovative models.
With the level of competitive congestion as it is, consumers today literally have hundreds of equally compelling products and/or services, right at their fingertips, or across the street, or a key tap away – and, all for lower and lower prices.  This would suggest that creating new products, more often, could alone be a winning strategy.  And it indeed, did spawn and enable the “fast fashion” modesl such as Zara, H&M, Mango and others.  However, even “newer, quicker and more often” has now become just the price of entry.  Besides, whatever the “new” is today, will likely be “knocked off” overnight anyway.

So, one of the new rules is that beyond product and price, retailers must create an experience for consumers, both online and off, and particularly for the brick and mortar stores.  And, not just an experience, but one so powerful as to go way beyond connecting emotionally, to connecting with the mind: a neurological connection.  For example, just the anticipation of a Starbuck’s latte or a yoga class at Lululemon, will release a euphoric surge of the chemical dopamine in a consumer’s mind, enough so that they will travel across town to those stores when a yoga wear or coffee shop might be right across the street.  Online, it’s the rush to Gilt Groupe’s “flash sales” or Zappos service.

The second rule is what we defined as “preemptive distribution:” preempting the competition to get to consumers first, faster and more often, ahead of the hundreds of other equally compelling competitors.  This means identifying and operating on all possible distribution platforms, both online and off, as one large “omnichannel.”  And, it’s manifesting itself in many new ways: It was Kohl’s early on and now every major big box retailer is utilizing small stores to get closer to their consumers, into their neighborhoods, preempting competitors; or it’s Brooks Brothers and Top Shop on Nordstrom’s distribution platform; or it’s Sephora at JC Penney; Sun Glass Hut in Macy’s; Tesco’s virtual stores lining the walls of South Korea’s subways; and, it’s Amazon, trying to preempt the world with everything for everybody; and, on and on.

And, lastly, the new rule without which the other two are rendered useless.  Simply, to be able to achieve both the neurologically connecting experience and the level of preemptive distribution necessary, requires that a brand or retailer have maximum control over all components of their individual value chains.

So, don’t waste the disruption, the paradigm shifts and the game-changing headwinds.  Embrace the opportunity, create a new vision and make this “the best of times” for growing your business.



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