Retails’ Core Problem

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\"\"Traditional retailers have been in panic mode for a while now. The shifting consumer landscape is rapidly destroying what years of sameness has built. The blame has erroneously been placed on Amazon, the internet, technology and over-saturation when the truth is that the fault lies in the retailers themselves.

The current environment features amazingly similar assortments from store to store, a self-service mentality and an overabundance of price promoting. The lack of proactive, consumer centric strategies and overemphasis on defensive tactical responses are killing traditional retails’ chances of success.

Tactical Laggards

There are many retailers who appear intent on using a more tactical approach that is akin to rearranging deck chairs on the Titanic”. The “laggards” lack both a vision and a strategy for this new dynamic marketplace and appear content to develop tactics that they hope will carry them through to when things return to normal. In short, they hope to survive. Their vision is too short-term, their strategies are outdated and they spend too much time developing defensive tactics rather than value added strategies. The culture of their companies are so steeped in history that they cannot develop and execute a strategy that is consumer focused rather than internally operations focused. Two sacred cows, Macy’s and Kohl’s, are visible examples of taking a tactical approach in hopes of solving a strategic problem.

Macy’s, in its view of being more competitive, is running fast to improve its omnichannel approach as well as its marketing plans. But being more competitive is not the issue, being more consumer centered is the issue — and they are failing miserably. Broadening their online business and moving their marketing spend to more social media are both important tactical efforts. However, they fail to recognize the fact that their consumer target is aging as fast as their current brand and product assortments. Post boomer consumers recognize Macy’s as their parents\’ store, complete with their parents\’ brands and products. The lack of both a relevant experience factor and a lifestyle/social connection continue to drive these consumers elsewhere. While new CEO Jeff Gennette has an encouraging vision on how Macy’s could evolve, it remains to be seen if he can execute a new strategic direction within that vision that will better appeal to the new consumer marketplace.

Kohl’s is in a similar position in the mid-tier channel. They are attempting to survive by closing stores, downsizing others, building a stronger online presence and reducing operating costs. All of these are admirable tactics in the face of declining revenue, but they will accomplish little to attract the emerging consumer to their doors. Like Macy’s, they are competitor focused instead of consumer focused. When is the last time someone younger than a boomer darkened the door of Kohl’s? Their efforts are doing little to connect with this consumer, provide an enticing experience and showcase innovative products that are relevant to their lifestyle.

Thinking Ahead

This so-called “retail apocalypse” is not all inclusive by any means. The media’s obsessive coverage of the overall trend line has provided little insight into the many fresh and emerging approaches that offer a glimpse of a much brighter picture. In addition to some new innovative, consumer focused approaches in retail, there are also players that are executing against a fresh vision and strategic direction in the hopes of reinventing their future. The willingness of some retailers to refocus and revise their overall corporate vision and strategic approach in the face of the new consumer driven marketplace will serve to separate them from those who appear intent on making incremental and tactical adjustments in the hope of simple survival.

The strategic thinkers fully realize that their responsibility has shifted from simply supplying the consumer to understanding and serving their changing needs. They are developing longer-term strategies that will direct their organizations in serving the emerging segments rather than the declining segments. These visionaries and strategic thinkers are adapting their positions rather than simply applying tactical band-aids to their potentially terminal disease. Two more sacred cows are strategically rethinking their businesses.

Walmart, despite their low price dominance, has responded to the marketplace shift by strategically acquiring business concepts and skills that can actually be additive to what they already have. It appears that in addition to moving into the digital channels, they are adding segments and skill sets that they did not already possess internally, like Jet.com, Modcloth and Bonobos. These strategic moves signal a broadened vision for the company to serve multiple emerging segments and channels by acquiring both new consumer concepts as well as an expanding skill set. Along with the innovations underway at Store No. 8, their broadened vision will guide future execution against this changing marketplace. Simply put, they are counting on an adjusted long-term view more than short-term tactics to improve their market position.

Target is focusing on fresh vision and strategies to improve their market position. Long known for development and execution of a strong proprietary brand portfolio that attracts and retains consumers, they are making proactive moves in order to adjust that portfolio in the face of emerging consumers segments that they currently do not serve. The strategic decision to abandon Mossimo and Merona, two strong legacy brands, in exchange for fresh new brand concepts (targeted underserved consumer segments) is a strategic shift in response to an evolving marketplace. But Target is not stopping there. They just launched year two of Target+Techstars that brings entrepreneurs into the company for exposure, mentoring and learning for both sides. The net result has been and will be a source of innovative thinking that will give Target a competitive advantage beyond store location and price.

Too Little Strategy, Too Little Time

Tactical activities like rationalizing store counts and store size, blending digital and brick and mortar into a seamless omnichannel offering and reducing operating costs will not be enough to raise the competitive level to survival. The consumer is requiring innovation, experience, value and relevance that is aimed specifically at the individual. They are empowered with the technology to sort, save and/or delete based on their preferences. It is up to each retailer and brand to decide how they will approach this new landscape. Standing still and hoping it will simply pass is not a viable option. Unfortunately, it appears that the presence of strategic thinkers and visionaries within traditional retail is in short supply.

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