Retail Reality - Bad strategic decisions coming home to roost

Over the last few years and significantly more over the last few months, retail leaders have been discussing the downturn in the retail market. Is this much of a surprise? With the likes of Amazon and ebay taking the fulfilment business to the next level, they have naturally pushed run of the mill retailers into a challenging position. This is nothing new and online retail is only really the next evolution of what was once the upstart of the retail industry that was mail order catalogues. So the question is “Why didn’t traditional retail react sooner to this trend of remote shopping?

This is in part because they weren’t interested in taking on the challenge. There was a held belief that both could co-exist and big retail outlets whether it be the super markets or department stores could continue as they always have. This seemed to be borne out with the elimination of many of the catalogue businesses and traditional retail sector sat back and patted themselves on the back as online shopping killed the catalogue market.

Unfortunately for retail online shopping didn’t sit still. With the development of greater product portfolios transformation in delivery options heading towards same day delivery in some areas, bricks and mortar retail really have a fight on their hands. The biggest problem bricks and mortar businesses face today is customer loyalty and this is not buyer loyalty to the reseller. This is retailer loyalty to buyer. Something that is in less than short supply on the high street.

Manipulation

"Manipulations in the bricks and mortar retail have been the core go to strategy for decades."

The so called loyalty schemes, as the new GDPR law has identified, have shown that the reality is it was never about delivering loyalty and value to a customer, but a more enhanced way of delivering greater manipulation or additional revenue streams by selling the data that these loyalty cards collect.

Manipulations in the bricks and mortar retail have been the core go to strategy for decades. The trouble is once you start on the “2 for 1”, “50% extra free”, “Buy now pay later” or any number of other manipulations you cannot stop and your purchasers will quickly switch to another option if you do.

However all is not lost

There has been a resurgence of artisan retail in areas such as fashion and the food industry. Predominantly the food industry are leading with the likes of farm shops, traditional butchers and bakers. Now the majority of purchase decisions from these outlets are based on quality and customer experience and not price. Even to some extent the baker delivering, the butcher delivering meat or the grocer delivering in-season fruit and veg and delivering a true customer experience is starting to make a resurgence. Although this is nothing new and we have even seen the reintroduction of a milkman in our local area. This is only a response to the fact that big retail have no true customer relationships. The reality is this type of retail is just a fulfilment. If you can no longer fulfil customer needs then you will cease to be of value.

So if you work in a large retail business and have lots of buyers but have no true customer relationships you then have no true customer loyalty and the past decades on delivering shareholder value and zero hour contracts to employees will mean that the money will follow wherever the customers go, closely followed by your employees. With all likelihood this could be an amazon online business that has now taken a more bespoke bricks and mortar approach to enhance and deliver greater customer experience but as an addition to a streamlined business model rather than the only business model.

The edge of the precipice

“With greater focus on employee satisfaction who in turn focus on customer value it has been shown time and again this approach has delivered greater shareholder value over the long term.”

The precipice that retail is on the edge of is due to the total focus on shareholder value above every other aspect of business. The missed opportunity for retail has been the fact that they had all the pieces to deliver the best solution and yet chose to ignore change and repeat the mistakes of previous industries. With greater focus on employee satisfaction who in turn focus on customer value it has been shown time and again this approach has delivered greater shareholder value over the long term.

However if you are in a business and trying to meet the demands of short term investors you are effectively trying to appease a group of gamblers who are only looking for a short term gain and have no loyalty to the business beyond what they can get out. As with all hyper growth figures in whatever industry you care to look at they are always followed by a significant bust. Whether it be the dotcom era, or the financial services a decade ago, no industry escapes this reality.

In summary our city centres have been evolving for hundreds of years and perhaps with the death of the out of town shopping experience much needed housing could be built on these brown field sites and I am not sure the death of the whole retail experience of fighting through the traffic, finding a parking space, finding an item I am looking for and then often trying to find an assistant which seems to be a rare commodity nowadays isn’t necessarily something we are going to mourn the loss of.

For this trend to change I would advise putting your employees first, who will then put your customers first and deliver a true value experience. This will ultimately derive stability and value for your investors. It may also be a good idea to revisit your vendor relationships and look to add value to them as most retail business is in effect a value added reseller business where little to no value is actually added.