Spring is indeed here. Or is it summer? If you live in the southern part of the U.S., as predicted (but often forgotten) Mother Nature has played her usual games—one day we are enjoying temperatures in the low 80’s and the next day, a sudden cold snap knocks us off our feet and has us begrudgingly reaching for our winter coats.
Back in February, I spent a good portion of my weekends out in my yard. Even with the unseasonal warm temperatures in the south, many of my colleagues and friends couldn’t possibly imagine investing virtually entire winter weekends doing yard work. But as most compost-cultivating people know, for the best success in the months ahead, spring yard work begins in late winter with pruning trees, removing dead branches and leaves, and beginning to envision and plan garden spaces—paying particular attention to the trees and plants that flourished vs. those that fared poorly the prior year. These efforts were driven by a sense of urgency this season, since spring “sprung” so quickly in many geographies. Why do people like me spend so much time, money and effort on these outdoor spaces—especially in the dead of winter when things aren’t looking so great? It’s so we can experience and enjoy the resulting beauty of nature (and our hard work) once the warmer weather days of late spring and summer are finally upon us.
While in the garden, as when I’m running, my mind gets to wander—I think I’ve come up with some of my best ideas while not trying to think at all. During my late winter and early spring yard work this year, I realized how these preparation efforts parallel many of the dynamics happening in today’s retail industry.
At an alarming pace, consumers are driving retailers to adopt new business models, alter merchandising strategies, refine pricing and promotional tactics, and redesign operational procedures. Coupled with competitive pressures, increased globalization, and legislative changes, retail has indeed become a precarious environment for many companies. We have all been witnessing the slow demise of the traditional shopping mall, and every day we learn about more retailers who are either shuttering stores or declaring bankruptcy. Robert Kaufman, Parker Avery’s CEO, discussed this fate in our latest quarterly newsletter, Stepping Off the Cowpath.
Yet throughout these challenging times, we also are seeing companies, both tenured retailers and newer brands, who are taking risks and finding new ways to persist and thrive in an industry that truly exemplifies the phrase “survival of the fittest.”
I am convinced that brick-and-mortar retailing is not dead, but for most retailers’ survival, this channel does need acute revitalization. Let’s face it; people are by nature very social creatures. We crave experiences and relish sharing them with others, as well as receiving recognition and instant gratification. This dynamic is the reason social media posts that include pictures of people enjoying an event or gathering together typically achieve the highest number of “Likes” and comments. Experiences matter—and shopping is an activity that is universally needed and very often used as a social outlet involving friends or family. Few social media posts of an Amazon purchase garner the same recognition.
Many retailers are increasing their investments in physical spaces to augment the customer experience far beyond simply shopping. REI has long done this, with many of their larger stores incorporating a rock climbing wall and extensive class offerings, but newer fast-growing brands like Yeti are also jumping on this bandwagon “through experiential installations that immense customers in the outdoors” (read: http://www.chainstoreage.com/article/yeti-austin). This type of experiential retailing necessitates an overhaul not only the physical layout of the store, fixtures, equipment and systems, but more importantly the re-alignment of store roles and responsibilities to ensure the entire environment delivers on the shopper experience promised.
Another approach that is transforming the retail landscape is the expansion of the store-within-a-store concept. Long employed by traditional department stores in the beauty counter area, retailers are now finding innovative ways to leverage this strategy to reduce operational expenses such as inventory and payroll, while at the same time deriving much-needed value from underused real estate by increasing foot traffic. This type of arrangement can be highly beneficial to both parties – as well as the time-strapped shopper – it allows the “host” store to focus on its core assortment and services, while the smaller partner handles complimentary products and / or services outside of the host’s assortment. Doing this well requires integration and coordination of systems and business processes, as well as alignment of some roles and responsibilities for both parties, so it doesn’t exactly happen overnight, but it takes far fewer resources and effort than for either party to try to go it alone.
There are other new brick-and-mortar models emerging, however, the picture painted on the “front lines” is only part of the story. A key initiative for success in either approach is deeply assessing and transforming store assortments to better align with customer demands across all channels. To support this capability, many retailers are taking a step back and evaluating their overall merchandising strategy, organizations, processes and systems. This may include purchasing new or upgrading existing applications, but it can also mean taking better advantage of existing functionality by redesigning processes and aligning their support organizations to become more nimble, flexible and effective.
Another area on which we see intense focus is in pricing and promotions – primarily using data and advanced analytics to augment promotional forecasting and better align these strategies with dramatically changing shopping patterns and the uber-informed consumer – all while optimizing margins and introducing new ways to engage and delight shoppers.
This new retail world represents a huge challenge and widesweeping change, yet an amazing opportunity. Doing the often-tough prep work – defining the brick-and-mortar strategy and customer value proposition, understanding the merchandising, pricing, and operational capabilities that will seamlessly deliver on that promise across all channels, and then making hard decisions when designing, selecting and implementing the appropriate systems and organizations to provide the necessary capabilities – are vital tasks that will enable retailers to achieve success in the months and years to come.