Recently was invited to cover a major retail industry event in São Paulo, Brazil entitled Expo Magalu – a one-day extravaganza that brought together, virtually and in-person, over 15,000 small and medium-sized independent retailers for a day of discussion about how to transform traditional brick-and-mortar businesses into omnichannel sellers with a significant ecommerce presence. The array of educational and networking sessions focused on next-generation logistics, payments, online store building, and a host of other related issues – even a crash course in online commercial ethics – that have suddenly been catapulted from “nice-to-have” to absolutely mission critical in the era of Covid-19.
Metaphor for the Moment
The highlight of the day-long event was a conversation between NBA legend Earvin “Magic” Johnson, and Frederico Trajano, CEO of Magazine Luiza, the largest retailer in Brazil, which I was invited to moderate. We had a lively and spirited chat with Magic, who connected many dots from his storied career in the NBA and on the 1992 Olympic ‘Dream Team’ to the success he has found in his post-basketball life as an entrepreneur and businessman. The conversation sparked the idea that, in many ways, retail is a near-perfect metaphor for the moment we as a global community – not only in the U.S. but in many large, complex societies like Brazil – are going through.
Magic drew many comparisons from his life not only as a sports superstar but as a trailblazer on inclusion and diversity and HIV/AIDs awareness with his success in building a business empire that has a net worth estimated to be approaching $1 billion. He talked extensively about the social and moral imperative that business leaders – retailers in particular – have in looking beyond the bottom line and acting as agents of positive change in the societies in which they operate.
Innovation is building upon the strong foundation that brought you to where you are today, leveraging that rich history to propel you into the future.
In the conversation, Johnson demonstrated that he knows the inner workings of retail world well. Aside from his many celebrity endorsements over the years, he once owned 125 Starbucks stores located in underserved urban markets and helmed a nationwide chain of movie theaters; he even created the ‘Magic Card,’ a prepaid MasterCard aimed at helping low-income feel more comfortable buying products online.
Johnson’s talk reminded the audience that the pandemic has, on one hand, accelerated countless new business models, force-feeding innovation into even the sleepiest of sectors, while completely upending others. But the impacts of Covid are also being felt far beyond corporate P&L legers – it has sharpened the fault lines that run deep through civil society, making their grooves wider and edges more jagged. We are left with a mise-en-scène in which the wide-angle lens with which we view the retail sector can easily serve as a looking glass for sizing up the seismic paradigm shifts underfoot across the whole of society.
To Be Essential or Not to Be
Ever since the pandemic began dominating newscasts, we have constantly been reminded that the modern workforce has an invisible line that separates it into two discreet camps: essential and nonessential workers. If a job was deemed nonessential, and it couldn’t be adequately serviced remotely from home, it was likely furloughed or extinguished altogether. Essential workers, in contrast, by putting their lives in danger performing the basic tasks that kept society and the economy on the rails, have been, in most cases, heralded as the heroes of the pandemic.
Retailers, mirroring society writ large, have also grappled with essential or nonessential status. Target for example, was able to stay open during the pandemic because it provided products deemed essential – food, toiletries, pharmaceuticals, and the like. Although their shareholders may beg to differ, mall store brands – take Macy’s as an exhibit A – found themselves on the wrong side of the so-called ‘essential’ leger. Forced temporary store closings exacerbated what were already amounting to strong business headwinds, the result of changing shopper demographics and the rise of ecommerce. This rift in the economy raises a larger existential question of what makes one essential. It also poses major questions C-suite executives are likely still grappling with: will big traditional mall retailers such as Macy’s adjust their business models by strategically expanding their product portfolios to ensure that they are never deemed nonessential the next time a global pandemic besieges the economy?
Perhaps the most obvious way in which the metaphor between retail and society comes to life is the growing gulf between the haves and have-nots. Just as income disparity has skyrocketed in the months since Covid became a part of our daily parlance, the chasm between sellers that had already fully embraced online selling and had made the necessary investments in logistics systems to weather the storm brought on by the pandemic became glaringly obvious. Magazine Luiza, for example, had been laying track for some years in service to its mission to digitize Brazilian retail by building an enormous ecommerce marketplace for third-party sellers. Long before Covid-19 was a thing, the Latin American retail juggernaut had been smartly acquiring an array of logistics and technology providers, building out warehouse capacity, and figuring out the best way to leverage its huge physical store footprint to manage last-mile delivery. When the pandemic hit, it was a matter of stepping on the gas of a vehicle that was already moving at 60 MPH. Unfortunately, for many other retailers across the globe, Covid-19 caught them flatfooted, as they were forced to try to get to zero-to-sixty almost overnight.
Survivors and Failures
The upheaval brought on by Covid-19 marked a breathtaking acceleration of many trends already under way, propelling some companies to post record performance numbers just as others nearly entirely disappeared. The list of well-known retailers that failed the ‘Covid test’ with flying colors, either filing for bankruptcy or going completely out of business, ranges from marquee nameplates such as Brooks Brothers and Neiman Marcus to brands as varied as Modell’s Sporting Goods, Pier 1, and Lord & Taylor. But at the same time, Amazon, Walmart, and Target were buoyed by the pandemic, exacerbating the gap between the haves and have-nots of retail.
Closely related to the question of disparity is the issue of the digital divide. In Brazil, for example, the retailers that had heavily invested in ecommerce and digital selling platforms cleaned house while the vast majority of the nation’s 5.7 million retailers remained shuttered amid a raging virus. This disparity was also evident on a human level as white-collar information workers easily transitioned into safe, at-home set-ups while blue and pink-collar workers were either laid off, furloughed, or forced to work despite the considerable risks. Across every major demographic crosstab – socioeconomic, rural versus urban, and ethnic – the pandemic dug into our already gaping digital divide and wedged us apart even further.
Science and Innovation
But perhaps most poignantly, of all the ripple effects emanating from the successive waves of Covid, is one that is decidedly attitudinal in nature, pitting those primed for innovation at all costs against a class of incumbent heavyweights, desperate to hold onto past beliefs as long as possible. In the U.S., we see this divide in largely political terms where there is a tsunami-sized backsplash against science and medicine expressed by tens of millions of Americans who refuse to take even the most basic of steps recommended by the CDC such as mask-wearing and getting vaccinated to the collective detriment of us all. Here retail is an apt metaphor
The Politics of Everything
Although it is a misconception to say that, globally populists have uniformly mishandled the pandemic, it is true that in the major economies throughout the Americas – namely the U.S., Mexico, and Brazil – populist elected leaders downplayed the severity of Covid-19 for an array of political reasons, oftentimes forcing a reckoning in boardrooms that pitted company policy against what was being said by officials at a state and federal level.
This contentious dynamic in which company policy oftentimes was forced to go against what major political actors were doing (and saying) posed a new question: What is the role of a retail executive in a pandemic economy?
Over the past two years, corporate CEOs who generally prefer to stay mum on divisive topics raging across society have been compelled to comment on the cultural zeitgeists of the day. This trend, aptly labeled as the new era of ‘woke capitalism,’ has transformed retail leaders into agents of political change, having been called on to make public statements about everything from voting rights to civil rights. No longer operating in the shadow of the boardroom, executives are under pressure to take public stands driven by consumer demands.
The Brave March Forward
Perhaps attitudinal true north both in society and retail is not a question of either-or but more accretive in nature; building off Magic Johnson’s clarion call to retailers to forge ahead not only with next generation ecommerce tools but to make a difference in society. Trajano, the CEO Of Magazine Luiza, summed it up best: “Whereas some people like to associate innovation with a complete departure from the past, I see it quite differently; innovation is really building upon the strong foundation that brought you to where you are today, leveraging that rich history to propel you into the future. Yet it’s not about profit at all costs. It’s about making a difference as well.”
I think Trajano is onto something rather profound – something that both retailers and society as a whole would be wise to consider.