Posts Tagged ‘strategy’

The One and Only Question Facing Sears

Tuesday, January 3rd, 2012

By Doug Stephens

Amid the sounds of tearing gift wrap and popping champagne corks, ailing giant Sears Holdings Corp. announced over the holidays its intent to close as many as 120 stores.  This of course, came as little surprise to the industry that has witnessed the slow motion train wreck that Sears has become over the last several years.  The company has desperately been throwing a variety of ideas against the wall in the hope that something sticks.  So, far nothing has.

Yesterday Bloomberg news quoted Sears Chief Executive Officer Lou D’Ambrosio as saying that a combination of more technology and physical store improvements would help to put the retailer back on track and that Sears has to get better at delivering what its customers want across multiple platforms.  Mr. D’Ambrosio by the way, came to Sear’s by way of companies like Avaya and IBM, so he’s clearly no lightweight in discussions around technology.

Few would argue with the idea that Sears lags technologically or that its stores are dingy and dilapidated.   Even fewer would dispute the truth that Sears has to execute across multiple channels to be successful – that’s just table-stakes in today’s industry.

When tactics are mistaken for strategy

The problem I have with Lou D’Ambrosio’s thinking is that I believe Sears real problems are far more fundamental and critical.  In fact, I would argue that both the lagging technology and shoddy store conditions at Sears stores are symptoms of a far more deadly syndrome and one that goes to the very root of the company.  In my opinion what’s killing Sears is a complete and utter lack of clear and forward-looking vision.  No one has created a cogently articulated picture of what the Sears of the future looks like.  No one has made a promise to consumers about delivering something remarkable or uniquely valuable.

It’s a classic example of a business mistaking tactics for strategy.  Last year the “strategy” was licensing store space to Sear’s vendors.  This year it’s renovations and technology.  Who knows what will it be next week, month or year.   Certainly not the store staffer responsible for representing the brand to the consumer.  And therein lies the problem.  Sears has lost all sense of brand essence and purpose.

The one and only question

Frankly, there’s  only one question that the leadership at Sears needs to answer.  “What can Sears offer the world that the world can’t get somewhere else?”  The answer to that one question becomes the cornerstone for the entire strategy going forward. It becomes the prime occupation of every Sears employee – from Mr. D’Ambrosio down.  The answer to that question is all that matters.

If the answer is “nothing”, then there’s no technology or store renovation plan on earth that will save Sears.

 

 

 

 

 

 

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Posted in Marketing, Store Experience, Strategy, Technology, The Future

What Duane Reade’s New Store Concept Says About the Future

Wednesday, July 6th, 2011

By Doug Stephens

Retail concepts in Manhattan don’t always make the best examples for emulation elsewhere but there may at least be some strong directional cues to be taken from Duane Reade’s new flagship store, opening tomorrow in New York.

According to Convenience Store News, the 22,000-square-foot flagship store, located at 40 Wall St. will operate 24 hours a day and take a decidedly more upmarket position than previous concepts.  While maintaining a strong focus on health and beauty, the store will also offer a “sushi station, featuring a chef and full menu; a juice market, offering smoothies; a Starbucks coffee and fresh bakery counter; one of Coca-Cola’s new Freestyle machines dispensing 130 varieties of Coca-Cola; and an expanded natural and organic section containing fresh fruits, vegetables, wraps, sandwiches and salads.” There will also be a doctor on the premises.

What seems clear with the concept, is that Duane Reade is building a model for a store that is not simply a place to visit but rather the place to be.  It speaks to the certainty of the drugstore becoming an increasingly central aspect of life for the approximately 1 in 4 Americans heading into senior citizenship.  It clearly positions the store as the place to accomplish many of the day’s medical, shopping and leisure tasks in one, easy to shop destination.

Another and perhaps more subtle undertone of the story touches on what many see as a growing polarization of wealth in America, where the traditional, middle of the road drugstore can no longer serve an increasingly economically disparate population.  Instead, such mid-tier stores will likely be replaced with either high-end wellness stores like this one or bare-bones dispensaries for those with less financial means.  The local drugstore as we knew it, may be nearing it’s end.

So, while you might not find a sushi bar in the Walgreen’s in Keokuk Iowa anytime soon, what seems certain is that drugstores in America will increasingly expand beyond their health and beauty roots, into a myriad of other product and service categories.  For those who can afford the experience, such stores will not simply be places we go when we’re sick but rather places we go to be well – a hub of our daily lives.

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Posted in Marketing, Shopper Marketing, Store Experience, Strategy, The Future, Trends

Avoiding Your Napster Moment

Wednesday, June 29th, 2011

In a previous post I talked about how companies are often blind-sided by what I call Napster moments.  Napster moments are radical, game-changing innovations that can throw businesses and even entire industries, into oblivion.

I also promised a list of things, that from my experience and research, companies should do to reduce the odds of falling victim to these Napster moments.  Observe most highly successful contemporary companies and chances are you’ll spot some, if not all, of these behaviors.

Here they are, in no particular order:

1. Think radically

Successful companies unlock opportunities by questioning their industries’ most sacred paradigms and throwing conventional wisdom out the window. Apple stores for example, were engineered on the premise that store employees would not try to sell anything.  Rather, their goal was simply to help customers solve problems and relieve their computing pain.  The outcome of this non-selling approach was enormous trust on the part of customers who, in the process, felt more comfortable spending their money (and lots of it) with Apple.  In other words, while other retailers were pushing discounts, staff incentives and tired old selling-skills training, Apple was breaking the first cardinal rule of retail and encouraging their staff not to sell.   Apple’s radical approach to retail resulted in some of the highest sales per square foot statistics in retail history.

2. Innovate in a non-linear way

What made Napster so disruptive to the music industry was its non-linear nature.  It wasn’t simply an incremental and predictable improvement on the industry’s sales and distribution model.   It was a complete rethinking of the way music was packaged, sold and consumed.  Napster didn’t merely improve on current technology – it eradicated it completely.  Non-linear innovation often combines seemingly unrelated things to bring entirely new product and service alternatives to market.  They are more difficult to develop but can create enormous competitive distance if successful.  Vibram, for example, took a non-linear approach to innovation with their “five fingers” shoe design.  While other running shoe makers were focusing on incremental improvements in cushioning, support and design, Vibram conceived a shoe that instead fits like a glove, allowing for a unique barefoot running experience.This is not to imply that incremental improvement has no place in your plans.  What I am suggesting is that if you focus solely on linear product modifications and extensions, you will not last long.

3. Get your head out of your association

Most industry associations have a mandate to make their members stronger and smarter but often fall short because they’re inherently risk averse.  Ideally, they should be trolling the dark waters for the horrible, disruptive things their members might not like, but really need to confront.  However, in many cases they tend not to, for fear of upsetting their membership and losing revenue.  So, while they should be champions of breaking down the status quo, they often do just the opposite, because it’s the status quo that pays the dues. It’s vital that companies not rely on their industry associations as their sole source of perspective and insight.  Instead, create out-of-industry alliances to exchange ideas and attend unique non-industry conferences.  Do whatever is necessary to find out what’s happening beyond the walls of your own industry.

4. Stop listening to your customers

If you build only what your customers ask for, your products and services are certain to be mediocre and cheap.  As Henry Ford said, “If I’d asked my customers what they wanted, they’d have said “a faster horse”.”  Don’t focus effort on building what your customers say they want –they don’t have a clue.  Build what they need but don’t know yet that they need it.  This means confronting the real issues with your product, service or industry and then hiring really smart people to create brilliant and often unconventional solutions.  If you must, hold focus groups to see what consumers think of your new products – not to find out what they think your new products should be.

5. Aggressively pursue your own obsolescence

I know it sounds like suicide but bear with me for a minute.  All business models have a lifespan yet very few businesses actually plan for their demise – for the day when what they sell or do is no longer necessary.  Fewer still actually attempt to disrupt their own model.  But here’s the thing… If you control the obsolescence of your own product or service model, you are by definition the one best positioned to own the new model – at least for a while.   Blockbuster Video, for example, had a chance to eradicate the brick and mortar video distribution model on which the rental industry stood and in doing so, control the subscription model.  But even after being approached by Netflix to explore a potential partnership in 2000, Blockbuster chose instead to defend its dying model of distribution.  Like Blockbuster, the rest is history.

To avoid Napster moments, become Napster

In essence, what it comes down to is that the only sure way to avoid Napster moments is to be the player in your industry causing them to happen.  If you don’t define the terms of change in your industry, someone else will.  History shows that the choice is pretty simple  – disrupt or be disrupted.

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Posted in Marketing, Strategy, Technology, The Future, Trends

Who Needs Retail Anyway?

Monday, September 13th, 2010

By Doug Stephens

If we’ve learned anything from the advent of online social networks, it’s that ordinary people can be quickly organized around a common idea, cause or event more effectively than ever before.  Whether it’s to monitor urban polling stations during elections, aid earthquake victims or simply flash-mob on a city street corner, our ability to rally people, for any purpose, is unprecedented, which raises an ominous question for retail.

If it’s that simple to coordinate attention, interest and effort, how difficult could it be to harness consumer buying power?

It’s also become abundantly clear is that our need for middle-men is quickly diminishing.  Disintermediation is occurring all around us – in music, publishing and even advertising – so why not retail?

The Groupon Incident

August 19th, 2010 may go down in retail history as the day the game changed.  It was on this otherwise uneventful day, that an estimated half-million people jumped on an unexpected GAP promotion offered through online deal-maker Groupon, crashing Groupon’s server in the process and shocking the retail world.  And while the lead story understandably touted this as a win for the retailer, the real wake-up call had more to do with the power of the consumer and the ease with which so many of them could have their collective buying power amassed so quickly.

Beyond Coupons

The idea of consumers coming together to combine their purchasing power is not new.  As early as 2006 we heard reports out of China of hoards of consumers coordinating online and descending  on retailers at a specific time to essentially extort discounts from them.  But as social networks become increasingly ubiquitous and sophisticated, the ability for consumers to coordinate their respective needs and organize in an effective way is clearly a reality, especially on major purchases such as appliances, electronics or automobiles, where the savings can be significant. And to be clear, I am not referring to the kind of direct-buying clubs often seen on television which are really only a slightly different layer of retail distribution.  Rather I’m talking about one hundred percent, consumer generated buying groups – by the people for the people so to speak.

For example, suppose 500,000 consumers wishing to buy appliances come together within a social buying network.  And of those, the 200,000 wanting refrigerators form a sub-group. And within the sub-group, the 10,000 consumers wanting a Sub-Zero model 123 form a buying group and make a direct offer to the manufacturer for all 10,000 units.  What manufacturer could simply walk away from an offer like that, especially when there’s 100 percent retail markup in their pocket to play with?

What’s particularly worrisome for retailers is that this social buying group could have more collective purchasing clout than they do!

Why Retail in the First Place?

A Retailer’s value used to be in their ability to amass selected assortments of goods that consumers would otherwise have little or no access to.  Secondly, they displayed the products in a way that made selection less time consuming. Lastly, they supported the assortment with valuable product knowledge – knowledge that was unavailable to consumers.   In other words, the Retailer added real, tangible value to the product in the process of selling it to the consumer.  They earned their cut.

However, given the access to information that today’s Consumer has, this value is increasingly being diminished.  To an ever -growing extent, the consumer doesn’t need the retailer.   After all, how do you adequately serve a consumer who knows more about your products than you do?  From the Consumer’s point of view many stores have become little more than expensive ship-to points.

The Key to Survival

Retailers that do manage to survive the inevitability of consumer-direct buying will be those who firmly re-establish their added value.  Beyond product, price or promotion, they will deliver something unique, difficult to replicate and above all, something of real worth to the consumer.  They’ll deliver an experience.  An experience that’s well worth the mark-up.

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Posted in Behavioral Marketing, Marketing, social media, The Future, Trends

Generosity

Tuesday, July 13th, 2010

By Doug Stephens

Generosity: noun~ Willingness to give or share; unselfishness

All successful relationships are underpinned by generosity.

The willingness to give or share without expectation of repayment is central to healthy, human interaction.  It doesn’t matter what you give.  It can be your time, your praise or simply your attention but without generosity, relationships tend to vanish in a cloud of selfishness and resentment.

This is equally, if not more true with business relationships.  Long-term success in retail comes down to fundamental beliefs with respect to the whole concept of generosity.  Specifically, you either believe that generosity is almost always rewarded or almost always abused.

You can easily spot businesses that believe the latter.  They’re the ones that have you deposit a quarter to use their shopping cart.  The ones that refuse refunds without a receipt. Those who link any charity work they do to a sales goal or promotion.  They cut the holiday employee turkey to save a few dollars. And you probably can’t use their restrooms either.  All because their belief system suggests that generosity is something that is abused and taken advantage of.  As the English poet Alexander Pope wrote “…all looks yellow to the jaundiced eye.”

Rare businesses, however, take the contrary view.  These businesses believe that the simple act of giving – whether to customers, employees or the communities they operate in is simply the right thing to do –it’s just good karma.  They provide their employees with great places to work, their patrons with great places to shop and their communities with businesses that give back.  They regard customers as people – not mere transactions.  Employees are part of the team – not simply headcount.   They give based on the belief that people are basically good and that their generosity will indeed be repaid – if not today then tomorrow and if not tomorrow then someday.

The unfortunate thing is that generosity is no guarantee of success.  Indeed, some of the most successful businesses in the world are also the greediest.    The consolation, however,  is that only those businesses who give generously will leave a positive impression on the world.  And perhaps that’s the truest definition of success.

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Posted in Branding, Marketing

An Inconvenient Truth About Bad Customer Service

Tuesday, June 29th, 2010

By Doug Stephens

The effects of bad customer service may take years to prove fatal but the eventual outcome is almost always corporate extinction.  Despite this, surprisingly few companies turn these negative situations around and actually improve their customer service position.  And as counter-intuitive as it seems, many businesses act like they don’t even care.

It’s a lot like global warming

Whether you believe the science or not, most would agree that the world’s climate is changing.  With this change we are seeing potentially devastating and irreversible impact on the planet’s ability to sustain itself and its inhabitants, for that matter.  Unchecked, the problem will almost certainly eradicate life on earth.

So why have we done so little to reverse the trend?  I mean the survival of the planet is a pretty big deal!

According to Dan Ariely, a professor of psychology at Duke University and author of the bestselling book, Predictably Irrational, there are three primary reasons for our apparent apathy when it comes to huge problems like global warming.  Firstly, the problem seems simply too large for any one of us to comprehend solving.  Secondly, it’s a problem that threatens future rather than immediate devastation.  Lastly, we have trouble visualizing how the little things we do as individuals (like using more energy efficient light bulbs or recycling), can contribute to solving the seemingly insurmountable problem.  The end result is that we don’t become emotionally invested in the solution.  We check out.

This same theory holds true  to systemically bad customer service.  Despite leadership droning on about the need for improved customer service, front-line staff often see the problem as too large, too complex and beyond their individual capacity to correct.

The Prius Effect

Perhaps no other automobile has become as synonymous with the environmental movement as the Toyota Prius.  It seems safe to assume therefore that people who own a Prius are more environmentally conscious than those of us who don’t.  However, there’s no credible evidence of any correlation between driving a Prius and having an elevated environmental consciousness.  Apart from owning a hybrid vehicle, Prius owners are much like the rest of us.  They don’t exercise any more day-to-day concern for the planet than we do.  In fact, one study concluded that a mere 27% of Prius owners made the choice based on a strict concern for the environment – most drive one to save money.  Nonetheless, we perceive Prius owners to be more eco-friendly.  In other words we infer from their choice of vehicle that they actually care more about the environment than they actually do.

So, what if we took this idea of inference a step further?  What if you could create a similar effect when it comes to delivering customer service in your business?  What if you could define specific actions, that if performed, would infer to customers that your employees appreciate them, even if they don’t?   Think about it.  Could you program specific events into the customer experience that make even the least engaged staff member seem to actually care about the customer?

Stop Talking About “Customer Service”

The first step I would advocate is to stop using the term “customer service”.  It’s problematic for a few reasons.  Firstly, it implies servitude and who wants to be thought of as a servant?  Secondly, it’s nebulous, making it difficult for staff to know if they’ve really provided it or not and also making it difficult to measure.  Lastly, it’s too subjective.  Great service to one person may be mediocre to another.

Instead, let’s call customer service something different – I’ve always liked the term the path to purchase.  And let’s agree that along the path to purchase certain defined, measurable and positive events should take place.   These events might range from holding a hotel door open for guests to shaking a customer’s hand– it doesn’t really matter as long as they’re defined, measurable and widely accepted as being positive behaviors.

So now, instead of pleading with staff to “improve customer service” – which is undefined, impossible to measure and open to interpretation, you can be instructing them to perform the specific tasks you’ve engineered into the path to purchase.

As a hotel guest, I don’t really care how customer-centric the bellhop is.  If they smile and hold the door open for me, I’ll infer from their behavior that they care.  As a shopper I don’t know if the salesperson appreciates my business or not but if they come out from behind the counter to give me my purchase while shaking my hand, I’ll infer from their actions that they do value me.

Behavior Drives Emotion

But how do we solve the problem of apathy?  How can we get our staff emotionally invested in delivering a better customer experience?

It’s commonly accepted that what we do affects how we feel.  Change the behavior and you’ll change the emotion.  It follows then that if you get staff consistently doing things along the path to purchase that clearly indicate caring for your customers, eventually those same staff will care about customers.   There may also be staff who choose not to come along for the ride but trust me, with a clearly defined set of actions on the path to purchase, they’ll stand out like a Hummer in a sea of hybrids!

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Posted in Store Experience

Is The Home Depot Selling the Farm… One Parking Lot at a Time?

Wednesday, November 18th, 2009

By Doug Stephens

You know business is tough when you have to sell off parts of your parking lot to make your revenue numbers.  However, news out of Atlanta suggests that’s exactly what home improvement giant, The Home Depot intends to do. Saddled with too much asphalt and too few customers, the one-time retail juggernaut is seeking buyers in retail and food service to set up shop on its tarmac – of which it owns approximately 89 percent.

According to Home Depot’s Vice President of Real Estate Mike LeFerle, the company has identified unused portions of parking lots at hundreds of its stores in the U.S. and Canada. They will be looking to sell to complementary businesses that target a similar customer base. Parcels are said to be approximately half an acre or more.

The question being asked by some industry experts is “Shouldn’t Home Depot be focusing energy on filling those parking lots with customers instead of selling them off? Others see the move as a smart use of capital that will give the chain the short-term cash it desperately needs, given the decline in its store business.

In my opinion, both views miss the big underlying issue. The implications of this move speak volumes about the long term future of The Home Depot  – and all big box formats- as a business model. Here’s why.

When Home Depot built these stores, they constructed parking lots to mathematically accommodate peak store traffic levels – it’s a pretty exact science. The size of the parking lot is directly proportionate to sales expectations. With that in mind, you don’t cut the size of your parking lot by acres at a time, in response to short-term market downturns. Permanently reducing the size of the lot is a clear admission that the store will never again achieve the peak level of traffic it was built to accommodate. That’s important because this could be the first time that Home Depot has ever definitively signaled that they’re current store model can’t be supported in the long run.

But it makes perfect sense. Not only are Baby Boomers on the down-size, many have been beaten up financially. Secondly, in the cold light of recovery, the excess consumption of the last twenty years seems to be giving way to a more sober and responsible attitude toward spending in general. Lastly – and this is the showstopper – the boomers’ closest demographic cohort, Gen X is significantly smaller as a generation – some estimate as much as fifteen percent smaller. In other words, even if Gen X spent like drunks, they likely couldn’t reach the post-crisis spending levels of the Baby Boomers.

So, while selling off unwanted parking lot space may offer short-term cash, it doesn’t really constitute a long term strategy to deal with what are shaping up to be some substantial long term issues.The real question is, once you’ve sold off all your unproductive parking lot space, what’s next?

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Posted in The Future, Trends