by Gerry Murphy, Founder of Pentalogy Marketing
There are many headlines about the “Retail Apocalypse” and how it’s the end of the Retail landscape as we know it. This may be true, but I would rather consider the state of the market more as a Market Rationalization than a demise. There are many success stories of evolution in the retail experience space, as well as the more popular headlines of “another one bites the dust.” I write this as Forever 21 enters Chapter 11, so I am well aware of the fact that this rationalization is definitely unforgiving.
And maybe it’s that merciless and unforgiving state that creates the negativity. There is no doubt that many brands have been hanging on for quite some time, but now face the finality (probably post-holiday season) of such a bleak outlook that there will be no other option but to scale down or shutter altogether.
Look around, and there is a path to something more than bare-minimum survival. For the last few years, the plaudits have been given to the “off-price” merchants and their ability to create an intriguing experience out of an ”out-of-season” business model. The key in this instance, and others, is that these businesses are fully aware of what they are, what they do and what they need to provide to keep customers engaged. They seized on the opportunity of creating the thrill of a treasure hunt mixed with the sticker delight of buying something off price, and that has led to a thriving business model for the likes of Marshalls, TJ Maxx et al.
The questions every retailer needs to answer are these: What is your purpose as a business, what do you stand for, and who do you appeal to and why?
FIND YOUR PURPOSE
It could be mistaken that this is a given, however, this is the true evolution of the retail market. What was once a business’s purpose, could now be diminished or gone altogether. The market has changed, and if that is not true for you, then your consumer definitely has. Direct-to-consumer (DTC) has changed the retail dynamic and created the fundamental need to be channel agnostic. The demand to build experiences in every channel has never been greater and those channel expansions can’t simply be annexes to the “core” business. I think this has been one of the greatest struggles for mature retail businesses.
The belief that every market development can be treated like another business vertical is proving to be unsustainable. The challenge of re-gearing a business that has operated with bias to a power center is real. I have seen everything from dominant business units, to finance, to the marketing function lead the direction of the business. Divesting power from deeply held beliefs is no mean feat, and in my experience, takes almost total disaster to force a reappraisal.
DISRUPT YOURSELF
For many years the greatest threat to brick and mortar was e-commerce. For the most part, businesses found a way to adapt to that, if not adopt it totally. As the digital world moves through its gears of social commerce and DTC development, how mature businesses adopt the web is an important question. If it was built as an adjunct, then that will presumably be the practice again. I think this time it’s different; the truth is retail should be turning itself on its side. The real disruption required within retail is not just channel adoption or product diversification, but rather organizational structure. The self-disruption is the “turn” to horizontal integration, the ability (and desire) to take the key elements of your business and make them the lead across your business. The step change from vertical silos to horizontal integration is stark and full of fear. However, to ensure the right rudders are guiding your business then this is imperative. The factors guiding your integration should be apparent from point #1 above. Is it your customer or key customer groups? Is it technology and/or data? It is only when this is lined up across the organization, and every business vertical has to think about these elements across the spectrum, that will you get an integrated purpose for your organization that will allow you to be as focused, agile and purposeful as the competition you fear.
The other home truth is that you probably don’t have the right “cast” to either make this happen or to manage it on the other side. The sooner your blueprint for “talent for your future” is understood, then the greater the chance you can successfully make the transition.
The third thing really takes the power of fusing the first two elements and adding this into the mix.
CREATE A CULTURE OF CUSTOMER CENTRICITY
This phrase has been used to death over the years, but take a look around and see how many businesses really get it. This isn’t mere customer policy or experience, but a fundamental emphasis on understanding who your customer is and “WHY” they use you (or sometimes more importantly why they don’t).
Connecting to the “why” of your consumer will connect you to the purpose and disruption you need to see across your organization, which makes this whole approach circular and therefore geared up to be able to refine itself over time. What has been held up as ‘omnichannel experiences’ needs to evolve into channel agnostic approaches that benefit your consumer, not just the ones you know how to build or are prepared to do.
The real challenge of the DTC model to retailers isn’t necessarily the financial model, but more so the fact that in a customer‘s view retailers control every single touch point with that customer. This gives very rich data on pinch points and failure rates and gives clear indication for progress and for opportunity. The transparency in the process leads to much less guesswork or ‘function finger-pointing’ and ultimately helps with clear ROI frameworks based on potential solves.
In mature retail, it has been the opposite view that wastes so much time, money and effort. Trying to work out where the break points are or who is to blame for failure. More than once I have heard – “why don’t more customers want to use this service?” The answer in most cases is that it was built because it could be built, not because it was desired or was a difference maker.
Of course, even the adoption of these three key approaches doesn’t guarantee success. However, it will force a business evaluation like no other. The customer-centric element alone gives you a blueprint for what your future may look like. It may not be as big as you are today, it may not be how you recognize your business either. It will, however, drive focus and purpose for your internal and external customers.
Please note: This article contains the sole views and opinions of Gerry Murphy and does not reflect the views or opinions of Guidepoint Global, LLC (“Guidepoint”). Guidepoint is not a registered investment adviser and cannot transact business as an investment adviser or give investment advice. The information provided in this article is not intended to constitute investment advice, nor is it intended as an offer or solicitation of an offer or a recommendation to buy, hold or sell any security. Any use of this article without the express written consent of Guidepoint and Gerry Murphy is prohibited.