THE CYCLE OF RETAILING

• Despite all the dramatics about Amazon disruption, the reality is just another rotation in the eternal ‘Cycle of Retailing’.
• The onus is on the retailer itself to ‘incrementally improve’. Retailers need to (and many have) make the necessary strategic, and financial investments to be multi-channel and data-driven.
• ‘One Customer, One Company’ – imagine every decision in the executive suite had to live up to this edict?
• The 3Rs of Retail – Relationship + Reward = Response
  (5-minute read)

Everything Old is New Again.

Despite all the dramatics about Amazon disruption, and the end of physical stores, the reality is just another rotation in the eternal ‘Cycle of Retailing’.

I was fortunate to study at the Harvard School of Retailing in the early 60s under Professor Malcolm McNair, who developed this theory of the ‘Wheel of Retailing’. He traced the evolution of pedlars, general, specialty, department, discount and other retail mutations. This was long before the internet and e-commerce, but at that time Walmart was just starting to disrupt existing retailing with ‘Automatic Replenishment’, the Point of Sale technology that still represents the gold standard of retail operations and inventory control. There are many major retailers today who still don’t meet the competitive standards Walmart pioneered. There are far more that couldn’t catch up and fell by the wayside.

The Onus is on the Retailer.

Without delving deeper into the birth of Discount Department, Big Box, and Power Specialty stores, you can quickly understand that the onus is always on the retailer itself to ‘incrementally improve’. In my career, I have experienced situations where many retail Presidents were seduced by the availability of funds through the stock market, private placements and junk bonds, to expand beyond their competence. Worse, the financial focus of many retailers left them paying more attention to their banks than to their customers.

This proved as fatal as the more recent delayed lack of interest and investment in technology. Despite all of Amazon’s achievements, and they are awesome, they are not almighty. Walmart, Home Depot, Lowe’s, to name just a few, have made the huge strategic and financial investments to re-engineer their organizations to be multi-­channel and data-driven. With this data comes deliverance.

Understand and Use Your Customer Data.

The competitive advantage today is understanding and using your customer data in every possible interpretation. This customer data allows retailers to integrate digital media data into their marketing, melding the mutual benefits of social media.

Despite all the drama of the more recent Facebook data political scandal (and the U.S. Senators’ glaring lack of understanding of how Facebook actually works), the reality is that Facebook, Google, YouTube and their ilk, were heaven sent for retailers, allowing targeting of customers in the most efficient and economical manner imaginable. All legally, without undue invasion of privacy and, in fact, to the improvement of the overall customer experience.

Easy to say, difficult to execute. It is actually surprisingly hard to bring customer insights and intelligence into the executive suite. Yet without this process, all retailing is doomed, no matter the appearance of apparent success.

The Structure of Retailing Needs to Change.

Here’s where yet another ‘Cycle’ takes its turn. The integration of all elements of retail. As innocent as it sounds, coordination of all levels of customer experience is not a basic retail competence.

This is yet another lesson from Professor McNair. Innocence and incompetence are inbred in retailing. Most retail management evolves within the organization, with its inbred lack of self-­reflection. Or ‘geniuses’ are installed from other disciplines with disastrous results, most painfully with Apple’s Ron Johnson’s takeover as Penney’s president and his elimination of Sale Events and the subsequent loss of half their sales literally overnight.

Basic research, into the differences between an Apple and Penney’s customers’ hierarchy of influences, would have prevented this disaster. Yet, as extreme as this example is, it is repeated, in different variations, in almost every retailer to this very day.

This is not new. It has frustrated, or at the very least, delayed, many of my efforts throughout the decades. It’s been a constant, slow-motion disaster unfolding right before my eyes. The very structure of retailing needs to change.

Like Cornell educates an unending stream of competent hospitality graduates, that then work through the ecosystem, retail needs to become more professional. Real estate developers, investment bankers and their like, no matter how brilliant, are genetically undeveloped to manage retailing. In fact, as I said earlier, the creation of a new breed of organizational structure is essential to face the retail future. Business Schools need to focus more on a separate Retail Degree path for the myriads of Management graduates.

‘One Customer, One Company’

By necessity, and bitter experience, some retailers are getting there. One, Canadian Tire, a $13.5 Billion Canadian retailer, has successfully organized its thinking into ‘One Customer, One Company’. That may sound over simplistic, but imagine every decision in the executive suite having to live up to this edict? Just the process, in itself, creates coordination and cooperation. Of course, it doesn’t eliminate incompetence but it sure exposes it faster.

On the other hand, the false starts and missteps of many major retailers, signal the ongoing difficulty of focusing on the customer experience from every discipline. Accepting there is a natural evolution of both technological and personal intelligence, the difficulty for Retailers will always be to understand and maintain the Relationship, with their Customers. Decades ago, I developed the 3Rs of Retail discipline and it still holds true today, remaining the basis of relevant retailing.

Relationship + Reward = Response

Everything that goes around comes around.