The New Rules of Retail

#Amazon Ain’t Just a River in Egypt

One of Mark Twain’s classics is the double-entendre, “Denial ain’t just a river in Egypt.”

Amazon is a trigger point for denial, which is rampant in consumer retail (or fill in your industry here).  Executives, directors and workers are in a mad and expensive rush to remain relevant – i.e. stay in business and keep their jobs or board seats – never mind showing a profit. Business as usual is the new quicksand and shareholder value just ain’t what it used to be. At least 50 percent of the learned experience or expertise from your entire career is no longer relevant. That’s a pretty hard thing to swallow when you’ve been at it for more than X-number of years and you’ve always been told or read how great you are.

I refer to these tidal wave shifts as Amazon Denial Syndrome (ADS). ADS is causing an alarming number of otherwise smart companies to act in ways that are very bad for business and putting them seriously at risk for future growth and sustainability.  It’s not that CEOs or directors deny the massive shift that’s occurring. They acknowledge it. But they are just (more and more) wildly uncertain and in denial about the cure. Smart and successful people are not used to being at such a loss for the solution. From startups to mature businesses; from mass to luxury; whether you’re selling a $2000 handbag or a $29.99 widget, all are susceptible to ADS. Denial knows no limits.

Coming of the Locusts

Several titans of retail, current and former, have been saying that what’s occurring is just a cyclical change that occurs every five to seven years. They compare it to what happened in 2008 or the recession before that. They claim to have seen it all before. I strongly disagree. What’s happening today is in no way, shape or form comparable to anything that’s ever happened before. Those titans are in denial. It’s the dreaded ADS and this group suffers from some of the most severe cases.

And it’s not just affecting the C-Suites. Journalists who write about retail are showing signs of it as well. In a recent WSJ story, “Three Hard Lessons the Internet Is Teaching Traditional Stores,” journalist Christopher Mims writes, “…retail in the U.S. feels like it’s at a tipping point.”

“Feels like?” That’s a form of journalistic ADS. It’s like saying your reporter colleague might have a drinking problem. It doesn’t feel like a tipping point. It is one. Malcolm Gladwell, who created the phrase, should be updating his Wikipedia page right now with a picture of a giant Amazon emoji eating everything and everyone in sight.

Think about it — the most successful and exciting strategy to occur in retailing in the last 20 years is a massive unending discounted sale of almost any possible product on the planet. So simple. The neophyte from Seattle, whose startup was selling unprofitable low margin books now has an astounding market cap of over $430B (and it’s founder is the second richest man in the world) as well as fast becoming one of the largest producers and distributors of film and television on the planet. The company that just now delivered seven huge green boxes of fresh produce, toothpaste and Honey Nut Cheerios my wife ordered this morning on her IPhone, also distributed the great award-winning movie, “Manchester By The Sea.” IMDB lists over one hundred film and television projects in development or in production at Amazon Studios.

Just imagine if R.H. Macy had decided to start Twentieth Century Fox and made “Miracle on 34th Street.”

Jeff Bezos Chose Commerce First and Content Second

Brilliant. Now that’s disruptive. Content should never be first if you desire to be in the commerce business. Hollywood has been trying to do this ever since someone thought pointing your remote at an episode of “Friends” was going to magically send Jennifer Aniston’s pink sweater to your doorstep and adorn your body in five to seven days. They’re still trying. #brianroberts, #stevenburke, #johnmalone #gregmaffei #timcook #eddycue #bryanlourd #ariemanuel #marcandressen #etc

In 1992, when the digital world was called “The Information Super Highway”, I was the first person to leave Fox Television and join visionary Barry Diller at QVC in West Chester, Pennsylvania. I moved there; Diller helicoptered in every day from New York because he didn’t approve of the overabundance of the color brown in the state. Everybody, and I mean everybody, from Hollywood and New York (the great Sid Sheinberg of Universal, Michael Eisner, Michael Ovitz, Norman Lear, Ron Perlman, Si Newhouse, Sandy Gallen, David Geffen and Calvin Klein) made the trek to West Chester to see just what the hell Diller was doing in business with Joan Rivers and her famous Bee Broach.

After a few months of learning what a “dollars per minute” business model was, Diller decided to make a bid to buy Paramount Pictures and he became chairman at the age of 32.  While Diller would likely agree that he was, and remains, much more of an opportunist than a strategist, especially in those days, one can only imagine what would have happened if “this little shopping channel” would have successfully acquired an entertainment company. (There’s an entire multi-platform saga to be told about those days, but that’s for another time.) #barrydiller #dougbriggs #billcostello

Omni Is Not Just Two

Until recently it was all about “omni this” and “multi that.”  Now it’s all about the notion of “reimagining.” Translation: Change your strategy or you will be reimagining yourself out of business.

For over 10  years, brick-and-mortar retailers have been investing heavily in “digital.” Few can quite explain exactly what that means or how to actually do it  — let alone deliver a meaningful ROI. And get ready, the next wave of daily “How to Survive in Retail” stories/blogs are going to start proclaiming the very word “digital” is a misnomer. The forward thinkers in the advertising world already have. They believe the previously distinct line between culture and “digital culture” is no longer meaningful. Sweeping statements about what “digital channels” have in common (against the foil of traditional channels) are next to meaningless. There’s a growing bias against the people who still make the distinction between digital and traditional channels or, in the case of retail, between so-called “bricks and clicks”.

But all shouldn’t be ominous with “omni.” Done correctly, omni can still be very effective. It doesn’t mean a store and an app or website. Those are only two things. Traditional stores thought that by simply hiring a team of 20-something Stanford graduates who could write code to make mobile checkout faster and design a better UX (User Experience) would enable them to compete with the pure-play online commerce players. But in almost all cases, it’s not working.  A well-designed and compelling mobile app with pretty but passive videos and a brick-and-mortar store with virtual dressing rooms is not “omni.” Nor do I believe opening stores is a silver bullet for struggling online players. It’s a mistake to think that the Warby Parker model is reason enough to follow their lead. Warby Parker disrupted the entire category of eyewear – how it’s priced and how it’s sold. They never approached their business by claiming they were omnichannel. But they certainly have made the notion of “omni” far more actionable than a simple definition of “more than one.”

Omni has to mean more. It has to be the entire customer experience. Think of it as a verb and not a noun. Everywhere you touch your customer has to be memorable — in the store, on the app, in the text, in email, at the cash register (yes – it still matters), on the sales floor, on TV, on social commerce, in customer service. And yes, the product itself has to be worth it. That’s how to create real value.

Flashes in the Pan

Remember when the first digital alarm bells sounded in the luxury retail sector? Many thought newcomer GILT GROUPE was going to over take big chunks of market share from the Saks, Nordstrom and Neimans of the world. Every morning at 11:00 AM when GILT “flashed” a new sale of say, a Ferragamo leather purse at “up to 75 percent off,” it literally caused daily panic for many retail executives. But like so many hit TV shows, it lasted only a few short seasons, and soon there were 10 other “flash sale sites” that customers would search for to find the same Ferragamo leather purse for 80 percent off. GILT was no longer relevant. There were Rue LaLa, HauteLook, Ideeli, Vente-Privee, FAB, OneKingsLane, Nasty Gal and so many others. They all forgot to be merchants first, and customer acquirers second. Their venture capital investors had them so focused on CAC’s – the dreaded Series A – F cash burning efforts behind the Cost of Customers Acquisitions — that they forgot to focus on the stuff, the merchandise itself.

Flash sale sites failed because the impulse (a sudden strong and unreflective urge to act) to “buy right now” was stolen when others began doing the same thing at similar or greater discounts. Consumers no longer had the sudden urge to act because they had a stronger urge to Google several competing flash sites before clicking “order.”

But Wait!  There’s More!

Ironically, “flash sales” had their origin in TV shopping over 30 years ago. Every night at midnight EST on QVC or HSN, an item was introduced without any prior promotion whatsoever. Customers would tune in, or simply channel surf by, and impulsively purchase the product. The product was only available from that network on that day, at that time, at a special price. When it was gone – it was gone. Really. The Today’s Special Value at QVC or the Today’s Special at HSN was often responsible for 20 percent of the total volume of the day’s business. That one item out of an average of 200 items aired only for a day. When I was CEO at HSN and EVINE Live, I knew every night by 12:15 AM if we were going to have a good day of business. (And whether I would sleep that night.)

But that was when TV shopping companies “owned” shopping from home. Today, shopping from home comes in many more flavors and choices. The legacy TV shopping customer is not only getting older, she’s not watching as much TV and/or she’s distracted by, well, Amazon, plus Facebook, and Pinterest, to name just a few. Many of the recent efforts to target a younger customer are proving a major challenge because younger customers (i.e. customers younger than 50) are simply not watching much TV at all. Despite years and years of costly efforts by the shopping channels to acquire new customers, they remain saddled with a negative perception that only someone’s mother, grandmother, or lonely aunt really buys from them. Regardless of whether that’s actually true or not (New York City is the number-one market for TV shoppers), it remains a major perception problem that they are unable to shake. Perception means more than ever in today’s social commerce worlds. Still, if anyone has a leg-up on regaining relevancy and customer growth, it’s these types of companies. #gregmaffei #mikegeorge #hsnboard

RELATED:   Wegmans’ Love Affair with Customers

The Onset of ADS

When “flash” began to dissipate, luxury retailers began to see a small uptick in their stores, while still touting their growing digital businesses in their quarterly earnings reports and keynote speeches. But it was during this time that the first known cases of ADS first came to light in the form of phrases such as, “It’s just Amazon, they don’t do luxury. No one with actual taste is going to buy luxury from Amazon. Amazon is not a threat. We’re such a different business model.” Then it was, “We’re going to be the Amazon of Beauty. The Amazon of Home. The Amazon of Jewelry.  The Amazon of Food. The Amazon of Organics. The Amazon for Millennials. The Amazon of (fill in the blanks).”  If you are still making any reference like this in your PowerPoint decks, you have ADS.

I first met Jeff Bezos in 2001 on a boat in the Puget Sound on the way to the home of Bill and Melinda Gates for a Microsoft CEO Summit. Phil Knight of Nike, Michael Eisner, then CEO of Disney, Martha Stewart, Paul Allen of Microsoft, Jeffrey Skilling of Enron, Sherry Lansing, CEO of Paramount, and Warren Buffet were on the same boat. At the time, Bezos was selling a rapidly growing number of low-margin books and starting to branch into other products. No one, except perhaps him, could have ever imagined what he would accomplish. Amazon was still three years away from showing a profit and absolutely no one cared if they did or not, certainly not Bezos. He showed no signs of worry as we both stood and stared in amazement at Leonardo da Vinci’s “Codex Leicester” manuscript that Gates paid $30.8M for, displayed in his library, along with the original script of “The Godfather.” Down the long hallway was the trampoline room where Phil Knight and I were bouncing off the walls. Literally. I sent Mrs. Gates the $79.99 Jackie Kennedy Faux White Pearl Necklace we were selling on HSN as a thank- you.

Ten years later, Amazon was suddenly hiring consultants and experts with traditional luxury experience and began testing the waters in luxury apparel by creating exclusive brands via their My Habit portal. Few in the luxury world paid much attention. Then Amazon paid millions to sponsor the Anna Wintour Met Costume Ball in 2012. And everyone noticed. By the end of this year, they will have the largest apparel business in the U.S.

In the 1950s, the legendary ad-man, Rosser Reeves of the Ted Bates Agency, and the inspiration for the hit A&E show, “Mad Men,” created the concept and acronym USP – Unique Selling Proposition. It’s one of the few selling concepts that has survived as long as it has. The good ones always do. Unfortunately, ASD has caused too many to forget their own unique part of the USP. But USPs must evolve like everything else. In such an oversaturated field of too much of just about everything, being unique, never mind disruptive, is proving harder and harder by the minute. Absent Unique and you simply have no Selling Proposition to compete with, well, you know who.

The Cure

Still, I remain confident there’s not only a cure for ADS, it’s still possible to be disruptive, unique and reimagined. These turbulent times, like the long and wild turmoil of the 60s begat major new ideas in all forms of our culture, including reimagined retail. But first, one has to admit there’s a problem. (See title of this story.) Stop being in denial that you don’t have the answers yourself.

Jeremy Liew, a former IAC colleague, and thanks to his investment in Snapchat, now a cool Yoox-shoe-wearing (no socks) and wildly rich partner at Lightspeed Venture Partners, said it perfectly and succinctly in a recent Robin Report story, Building a Disruptive Brand in the Digital Age. “You have to avoid competing against Amazon at all costs,” he said. “Amazon is a ruthless competitor who will win. Competing in a space with multiple brands on convenience and price is a losing strategy.”

The Free 17-Step Cure for Amazon Denial Syndrome

  1. Figure out who your target audience is. You must pick one. Even if they shop with Amazon.
  2. Customer data has never been bigger or more relevant. If you must spend more, spend on this. Don’t just focus on the Lifetime Value metric or what a CAC – Cost of Customer Acquisition — is.  There are 10 companies a week launched with a focus on customer metrics of every single shape and size.  However, don’t bother to acquire any customers if you don’t have anything of unique, or at least differentiated, value to sell.
  3. Search Google, Yahoo or Bing for “USP, Unique Selling Proposition” and read every single link you can find. Then gather your team together, debate strongly, then define yours. Only then can you apply Cure #4.
  4. Product Rules. Always. Make it authentic. Allow the customers to feel like they have a say in creating it. Co-creation is the next curation. But not at 75 percent off.
  5. If you must sell a product that is available elsewhere, and that’s a big chunk of retail worldwide, you better triple down on how you “omni” with your customer or Amazon will beat you.
  6. Music and atmosphere at the mall or in a store is the new elevator music. If you’re a store or a mall you have to find a way to be more enticing and entertaining in order to regain foot traffic into your space. You can be in just about any mall in America and not know the difference. Make it fun, make it proprietary. Delight, surprise, and reward the customer. Also consider migrating to the food business. Eataly is the new anchor of malls. Watch the documentary “The Secrets of Selfridges” on Netflix. Learn that not every single thing in retail needs to be reimagined, some of it is hidden in plain sight.
  7. If you’re going to add expensive tech to your physical store like those fancy virtual dressing rooms, or open a wine-bar, then train your sales staff how to leverage and use these assets. Moreover, train your sales staff period. Sales people are people too. They’re getting lost in the digital shuffle and when left untrained, they are hurting sales far more than anyone cares to admit.
  8. Create a reason for customers to interact with your brand or your product every single day – even when they’re not in the mood to shop. Not just in text or email. What’s the “live” thing that drives UGC (User Generated Content) as often as possible? Make yourself indispensable.
  9. Stay relevant and curious. Don’t depend on your children or friend’s children to tell you about Facebook Live, Instagram Stories, Snapchat, YouTubeLive, WeChat, et al. No excuses.
  10. If you’re in fashion, stop producing expensive fashion shows and sharing them with the world in real-time on Instagram when you can’t actually sell anything for six months. In the old days it was just buyers in a showroom. No press was allowed. And when they were, it was only by appointment to meet print deadlines. Sneaky journalists in Paris would hide cameras in canes to try to get the exclusive. Don’t show anyone, except your retailers, anything unless it’s available for delivery that afternoon. No one wants a six-month tease anymore.  Zero impulse. And you’ll likely get knocked-off way before by H&M or Zara.
  11. Learn what an Influencer is. Try to become one. They used to be editors, journalists and general merchandise managers. Thanks to online Influencers and the virtual ways the world communicates, there has never been a better time to discover or create great brands. See, for example, what the CFDA (Council of Fashion Designers Association) is doing to help launch talented designers and creators. Bravo to #dianevonfurstenberg, #annawintour #stevenkolb #andrewrosen
  12. Follow, in any way you can, what is happening in:
    a. VR (Virtual Reality) and AR (Augmented Reality) and what they are going to mean for commerce. Start with Facebook’s Oculus. It’s coming, and it’s going to be a big deal for commerce.
    b. Machine Learning – a type of AI (Artificial Intelligence). It’s the development of cognitive computing that teaches itself to get smarter and smarter; algorithms don’t. When it’s eventually applied to the design world, San Jose will become the new Fashion Capital of the World.
  13. Follow everything Marc Lore is doing at Jet/Walmart. In one hour at the recent Shoptalk Conference in Las Vegas, his invigorating talk in front of 6000 attendees with Scott Friend at Bain Capital, propelled Walmart, of all brands, to the forefront of nimble-ness. The other big-box presenters looked like they were in the Stone Age.
  14. Enough with all the weekly retail and tech conferences. More and more they feel like mass therapy sessions. Running one really great conference every few years feels about right – not every other week. The overload of conferences costs too much money, are often a time and margin drain, plus  the content is really only worthy of a Webinar on an iPhone.
  15. If you’re among the owners of the big European and American luxury brands like LVMH and Kering, keep focusing time and capital on new forms of distribution that you either control or you own. Your brands may be at risk of being lost in the shuffle of the massive disruption occurring in the wholesale/retail relationship.
  16. If the first word someone uses to describe you or a colleague is “nice,” you’re in trouble. “He/she is really tough and great with numbers, plus he/she’s a really nice person.” Be a hundred other things first, but don’t get saddled with the dreaded “nice” moniker.
  17. Repeat after me: Change is good. Change is scary. Change hurts. Change is hard. Change is expensive. Change is necessary. Change is here. I accept change.

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