Remarkable Retail

How to Win and Keep Customers in the Age of Disruption

Steve Dennis

• Publisher: LifeTree
• Year: 2021
• ISBN:
  9781928055938
• Topic: Commerce
• Subtopic: Commerce de détail

Physical retail isn't dead—but boring retail is! Remarkable Retail equips the savvy retailer with eight essential strategies to thrive in an increasingly volatile and uncertain future.

Digital technology has profoundly altered the competitive landscape for retailers. In Remarkable Retail, industry thought leader Steve Dennis argues that in a world of nearly infinite choice, where the lines between digital and physical are increasingly blurred, even being very good is no longer good enough. To win and keep customers today, retailers must be nothing short of remarkable.

In most retail categories, digital channels are often central to the consumer's journey, but that doesn't mean people aren't also shopping in stores; they're just using them differently, often browsing in one channel and buying in the other. The notion of a physical store channel and an ecommerce channel is increasingly a distinction without a difference; the customer is the channel. The future belongs to those who embrace the blur of digital and physical that represents modern retail today and work to deliver an experience that is more harmonized and more memorable, regardless of how consumers decide to shop.

Packed with illuminating case studies from some of modern retail's biggest success stories—and leveraging Dennis's more than thirty years as a senior executive and strategic consultant to dozens of brands— Remarkable Retail lays out the case for going beyond a slightly better version of mediocre and forging a path to being truly remarkable. To help retailers on this transformation journey, Dennis presents eight essential strategies for visionary leaders who are prepared to reimagine their way of doing business. A remarkable retailer is digitally enabled, human-centered, harmonized, mobile, personal, connected, memorable, and radical.

In an age where consumers have short attention spans, myriad options, and a digitally integrated relationship with every brand, Remarkable Retail is your indispensable guide to creating a powerful retail experience that keeps your customers coming back for more.

PART ONE

SHIFT HAPPENS

CHAPTER 1

An Epic Revolution, Accelerated

“Like art, revolutions come from combining what exists
into what has never existed before.”

—GLORIA STEINEM

Retail isn’t dead. Boring retail is.

Physical stores are hardly going away, but there will be fewer of them—some bigger, many smaller, most dramatically reconfigured. What they will look like, how they will operate, and the purpose they will serve is being reshaped, reimagined, and in some cases, totally rebuilt.

For years now, you’ve likely been reading stories about how online retail is taking over the world, a narrative that’s been brought to a crescendo by the pandemic. And it’s true that the ability to have virtually any product delivered through a digital transaction has largely eliminated the need for stores that were once piled high with merchandise, their shelves lined with cardboard sleeves, cellophane, and plastic: books, CDs, DVDs, game cartridges. . . . Let’s take a brief moment to mourn Borders, Blockbuster, and all of the others that faced the brutal reckoning of the first wave of digital disruption.

You might have heard that cheap money fueled some two decades of overzealous expansion of commercial retail real estate. This rampant overbuilding is now experiencing a major, long-overdue correction, made far more calamitous by the COVID-19 crisis. And anyone can plainly see that the once-great regional shopping mall continues to evolve, in many cases at an ever more dramatic pace.

Despite the clickbait headlines of a “retail apocalypse,” it’s worth noting that before the pandemic struck, many overwhelmingly brick-and-mortar-dominant retail brands were not only opening stores but were posting strong overall growth and profits. And while some paused or scaled back their agendas, many companies (At Home, Five Below, Tractor Supply, Ulta Beauty, et al.) announced new store opening plans even when lockdowns were still in place. Walmart is investing significant dollars to reconfigure more than a thousand of their stores to become more digitally enabled.

So-called digitally native vertical brands (DNVBs) that once raised gobs of venture capital by eschewing those pesky and expensive annoyances called stores have been experiencing much of their growth from the opening of physical locations. Here too some plans have been upended or stalled. Yet during the height of the pandemic, Warby Parker and Allbirds raised $255 million and $100 million, respectively, to support their growth, with store distribution and expansion very much part of their future efforts.

Apple and Amazon, the two most valuable retail brands in the world, clearly see their future success tied in some measure to physical retail. During the second half of 2020, with many pandemic restrictions still in place, Amazon opened several “4-star” concept locations, opened its second Go Grocery outlet in Seattle, and most significantly, began its foray into traditional grocery with Amazon Fresh, a 35,000-square-foot prototype store with initial locations in Southern California and the Chicago area.

All quite noteworthy. But as it turns out, a profound seismic shift was taking place well before the impacts of the pandemic started to ripple throughout the world—a shift far more revolutionary than the evolution that had characterized retail in the decades leading up to the turn of the century.

When the Tide Goes Out

Today’s retail landscape looks a whole lot different than it did two decades ago. In many cases it looks quite different than it did even a year or two ago. In fact, much of the retail industry of the very near future will be almost entirely unrecognizable.

The power in retail has shifted to the consumer. What was once scarce no longer is. We no longer go online, we live online. In most categories, digital channels (and, more and more, that means mobile) are central to the consumer’s purchasing journey. Shopping channels are blurring. The role of the store is being redefined. An abundance of choice, a veritable tsunami of information, an ever more cluttered world, and an increasingly distracted customer make it nearly impossible for a brand to be a clear and compelling signal, standing out, commanding attention, and most critically, garnering meaningful engagement amid all the noise.

The stark realities of the COVID economy mostly served to accelerate trends that had been emerging for many years, often amplifying or distorting their effects. While it may have seemed at the end of 2019 that struggling brands had ample time to mount a transformation, it soon became apparent that they were approaching the end of the runway. We may have believed—or desperately hoped—that what was deemed “innovative” by many legacy brands would be transformative, but in many cases it was turning out to be simply lipstick on a pig. Indeed, as they say in twelve-step programs, half measures availed us nothing.

“Only when the tide goes out do you discover who’s been swimming naked.”
—Warren Buffett

The differences between the retail haves and have-nots are becoming far more pronounced; this became increasingly obvious as the impacts of the pandemic shook most parts of retail (and society) to the core. This aspect of retail’s great bifurcation started long before the ascendancy—and more recent acceleration—of e-commerce and digitally enabled shopping.

For several years now, success has been found mostly at either end of a spectrum. At one end, brands that focus on low prices, dominant assortments, convenient access, and quick and easy purchasing continue to gain share. At the other end of the continuum, upscale, experiential, and more narrowly customer-focused retailers, along with a host of well-honed specialty concepts, have been enjoying improving fortunes.

Stuck in no-man’s-land, swimming in a sea of sameness, are those retailers that offer decent prices, but not the best; an okay shopping experience, but nothing really special; some sales help, but not anything particularly useful. The fact is, even before e-commerce began its rise to prominence, the Sears and JCPenneys of the world were struggling mightily. Their misfortunes were exacerbated by the long-term decline affecting most regional malls.

While it’s easy to blame Amazon for the prepandemic, multiyear woes these companies have experienced, the reality is that until recently most of their revenue was being siphoned off elsewhere: to off-price retailers, discount mass merchants, or dollar stores that offered stronger value and more convenient locations, or to upscale alternatives that offered a more relevant and differentiated experience.

Sadly, quite a few retailers picked an especially bad time to be boring.

A Brief History of Retail

Civilization may have started out with an emphasis on hunting and gathering, but it wasn’t long before bartering entered the picture. The marketplaces (Roman or otherwise) that were created long ago were no Amazon or Tmall, but they did the job. Just a couple of centuries ago, retail slowly started to become more organized and modern familiar forms of commerce were introduced.

The shift from bartering to the various forms of shopkeeper (the butcher, baker, and candlestick maker) took quite some time. In the nineteenth century, aspects of retail started to become more professionalized, as both specialty stores and department stores made their debut in many major cities in the US, Europe, Japan, and a few other regions.

The end of the century saw the advent of the mail-order catalog, which held the promise of bringing big-city shopping to small towns and rural areas. Sears, JCPenney, and Montgomery Ward were the early pioneers, becoming large, iconic brands in subsequent decades. Various formats evolved and expanded during the first half of the twentieth century, but as the post–World War II economic boom took hold, more and more consumers headed to the suburbs to pursue the American Dream. Regional malls were built all over the country, and the once-dominant mail-order retailers (and a handful of more upscale department stores) became their anchor tenants. Within two decades, malls had become the predominant retail format for many shoppers, and Sears was the king of the hill, becoming one of the ten most valuable companies in America in the 1970s.

The seeds of big change, however, had begun germinating a few years earlier. During the 1960s, Walmart, Kmart, Zayre, Woolco, and others started opening their twist on general merchandise stores. Located off the mall, with lower prices and less service, these rapidly expanding brands offered a more convenient and more value-oriented alternative that many shoppers found appealing.

Eventually came the emergence of so-called category killers. Similarly offering off-the-mall convenience coupled with a strong value orientation, Toys “R” Us, The Home Depot, PetSmart, Staples, Circuit City, and dozens of others started to open thousands of stores with huge assortments focused on more particular shopping occasions.

By the 1990s, retail offerings became more diverse and targeted. There were variations at one end of the value spectrum (off-price, outlet stores, dollar stores, warehouse clubs) as well as the other (Saks Fifth Avenue, Bloomingdale’s, all manner of high-end designer boutiques). Niche players in organic grocery, cosmetics, fashion, and home furnishings became more plentiful and joined the common tenant mix in power centers and lifestyle malls across the country. Home shopping (Home Shopping Network and QVC) became a phenomenon.

Most of these started to take a big bite out of the once-dominant regional mall-based department stores. In particular, the growth of fast-fashion and off-price retail stole significant share from moderate department stores during the decade, as did the emergence of off-the-mall home stores like Bed Bath & Beyond and Linens ’n Things and beauty-focused concepts like Ulta and Sephora, among others.

As we approached the new century, forces were gathering that would lead to profound and unprecedented disruption. Jeff Bezos, Steve Jobs, and a cadre of venture capitalists started to see how technology could completely change the face of retail. While the initial wave led to some really dumb and unsustainable business models (anybody remember Pets.com?), large, comparatively mature companies such as Nordstrom and Williams-Sonoma saw the potential and began investing in e-commerce and digital technology. Amazon began diversifying away from its original books-and-music offerings. Intrepid investors began getting excited about a second wave of online shopping businesses.

A Black Swan Meets the Purple Cow

As much as the retail world was experiencing an increasing pace of disruption, rapidly evolving customer preferences, and ever-shifting competitive dynamics, the global pandemic was a true black swan event.

Nassim Nicholas Taleb’s black swan theory describes events that come as a surprise, have huge consequences, and are often seen with the benefit of hindsight as entirely predictable. Historians can debate whether as a society we should have been better prepared to respond to such a cataclysmic set of circumstances, but it’s certainly clear that the medical, psychological, and economic impacts are, and in many cases will continue to be, significant.

For the better part of 2020, for many retail organizations, it made relatively little difference how remarkable your value proposition was. If what you sold was deemed “essential,” consumer demand was so strong it was often tough to keep up with it. On the other hand, if you sold mostly products deemed nonessential—and were primarily reliant on sales through brick-and-mortar locations—things got very bad indeed, with some historically strong organizations experiencing staggering operating losses for several consecutive quarters.

Marketers of exercise bikes, virtual-conference software, and home office equipment (as just a few examples) had business fall into their laps as it never had before. Those in the fine dining, travel, entertainment, and higher-end apparel business were hit with month after month of often unprecedented declines. While some struggled to stay on top of demand and a profound shift to all things digital, many couldn’t keep up with their bills. Even with massive government aid, many have had to close their doors for good.

To be sure, chance clearly favored the prepared company (to paraphrase Louis Pasteur). Brands that had developed and deployed strong digital and harmonized (my preferred term for “omnichannel”) capabilities did better than those that had not. Organizations with agility built into their operating model responded more quickly and effectively to the rapidly changing environment. The more remarkable the company’s value proposition, the more share they were able to gain or, in the face of category spending contraction, hold on to.

As the pace of disruption increases—as, indeed, events that we might once have thought of as black swans occur with greater frequency—we must build for resiliency and agility, just as we must strive to become and remain remarkable. Major change may create existential crises, requiring mitigation and putting our organization in defensive mode. But it may often create breathtaking new opportunities that demand we be ready to switch to offense.

“It is not the strongest of the species that survives,
nor the most intelligent; it is the one most adaptable to change.”
—Charles Darwin

The Six New Forces of the COVID Economy

As I write this in late 2020, it’s impossible to predict the full impact of the COVID-19 pandemic and how much it will fundamentally reset the retail playing field. Which shifts in consumer behavior will persist—and to what degree—is largely anybody’s guess. We have never endured a period of such profound and intense disruption. Trying to draw analogies to earlier crises seems wholly inadequate. And as much as consumers may tell us what they think they will do in the future, history indicates that they aren’t very good at predicting what they actually will do. Accordingly, we would be wise not to extrapolate too much from any such studies.

Indeed, any notion of being in a truly postpandemic world, even in a best-case virus mitigation and economic recovery scenario, isn’t likely to be fully realized for quite some time, if ever. As time passes, the way forward will almost certainly become more clear, but many of the changes brought about by the COVID-19 crisis will still be rippling through society (more broadly) and the retail ecosystem (more particularly). The costs of dealing with both the health and economic fallout from this crisis have ripped huge holes in the budgets of most governments and nearly every nonprofit and nongovernment organization. Many sectors of the economy will take years to get back to prepandemic levels.

It’s probably helpful to realize there is no “new normal,...