July 10, 2014

Retail

Read this, my friends (click here).

I could be 100% wrong, folks, but I believe we are killing retail by digitizing it.

Retail, the largest component of the much demonized "offline" world that software wishes to eat, must be experienced. Retail must be fun!

When I moved to the Seattle area, I would visit a Barnes & Noble store in University Village. This store had a fantastic math/science/marketing area. Stuff you couldn't find anywhere. It was a thrill to go in the store, spending an hour thumbing through these books. Then I'd purchase a book or two (often unrelated), or a magazine. Or not.

The internet changed the experience.

I could find anything I wanted online, at any time of the day. Discovery and thrill happened online. Barnes & Noble responded - they got rid of all the obscure books that I loved looking through, maybe because they weren't selling - obscure stuff could now be found online. Instead, they carried popular math and marketing books. Instead of 1 copy of 100 unique books, you'd find 100 copies of Seth Godin books, stuff that would sell in volume. Eventually, I stopped visiting the Barnes & Noble at University Village. No discovery, no thrill. I didn't need to go to a Barnes & Noble store to see a veritable plethora of books from a small number of pundits, or a wide selection of "Books for Dummies".

The popular line of thought is that the internet killed retail. This might be true. But, to me, our response to the internet killed retail more than anything that the internet did to retail.

First, we were told we had to be "multi-channel" - we had to have an online store to complement our retail store. This accelerates the demise of retail - we move discovery from the retail store to the website, decreasing in-store traffic. Why would we want less traffic in a store? When have you ever seen Apple encourage less traffic in an Apple store?

With less traffic in a store, fixed costs catch the eye of the CFO. Fixed costs are battled on two fronts. First, you cut expenses. That sure can't make the retail experience more fun. Second, you use marketing to drive traffic back into the store. And you've got problems when you ask marketers to drive traffic into the store. Why? Marketers love discounts and promotions. Discounts and promotions are taxes placed upon brands for being unremarkable. Eventually, most stores offered 10% or 20% or 30% or 40% off, often. When everybody executes promotional tactics, you end up with the same level of traffic averaged across the same number of businesses ... with the end result meaning that every retailer makes less money off of each transaction. This catches the eye of the CFO, who demands more expense cuts.

You end up with a self-serve store with few employees, no music, no smells, nothing visually enticing. 

You end up with a modern day mall.

And everything is sterile. It has to be sterile, because we're taught that the experience must be identical across channels - you cannot take a risk and capitalize on the strength of online at the expense of retail, or have a great in-store experience that is different from online. You must be generic, unified, integrated. You become boring, as boring as the solutions thrust upon retailers by the vendor community. You become the technology that wires the brand together. You lose your identity as a brand.

I always wonder why we bought into this line of thinking? H&M sold billions in the US in stores, with no e-commerce, at a time when the experts told everybody they had to integrate e-commerce with stores to be successful.

So now we are boring, sterile, integrated, and we're failing. Be honest - when is the last time you walked into your local Gap store and left feeling like you had the greatest experience of all time? And I'm not trying to pick on Gap, at all, it's just that you know who Gap is and you can relate to their in-store experience, which is every bit as "good" as the experience offered by their competitive set.

What is the response to the malaise we're in?

Omnichannel!

The way out of this mess is to even further digitize the in-store experience. "Fix the supply chain and you've fixed the brand!" We're being sold a CRM-centric experience of personalized, relevant, engaging content, coupled with behind-the-scenes technology that makes inventory awareness easy across all channels. That's it. That's what saves retail. Engaging content and knowledge of the fact that the socks you want aren't available in your store but can be shipped in a day or two from the store in Bellevue. You're told that the "customer demands this". Really? The customer demands operational excellence from a retail brand? Like that has never been the case previously?

Operational excellence certainly helps, no doubt. But it helps the vendors that sell operational solutions a heck of a lot more than it helps the retailer. And vendors dominate trade journals, where you hear about omnichannel solutions.

Honestly answer a series of questions for me.

  1. When you have engaging content, how much do your sales increase? 200%? 20%? 2%? 0.2%?
  2. When you have relevant content, how much do your sales increase? 200%? 20%? 2% 0.2%?
  3. When you do a great job of personalizing content, how much do your sales increase? 200%? 20%? 2%? 0.2%?
  4. When you have campaigns that are the same across channels, how much do your sales increase? 200%? 20%? 2%? 0.2%?
  5. Over the past decade, when you've done a great job of aligning your channels and you've done a great job of providing a technology-based solution to align channels, how much did your sales increase?  200%? 20%? 2%? 0.2%?
  6. When you identify a great new series of products/merchandise, how much do sales increase?
  7. When is the last time you experienced joy, love, happiness, thrill, excitement, satisfaction, or any other positive emotion after entering a mall-based retail store? What store provided you with that experience?
In sports, there is intense competition from "the living room". You have 7.2 channel surround sound and a 65 inch screen and access to every game live and you have great food (nachos) that can be made at home for a fraction of the price. Why should the customer ever get in a car, drive forty-five minutes or three hours, fight traffic, pay $20 for parking (can you imagine paying $20 to park at Macy's), pay $45 for a ticket for each of four people (or pay $145 for a ticket on the secondary market), pay $9 for a beer and $6 for a hot dog and $3 for a program. Why would anybody do that? Why would a person spend hundreds of dollars when the entire experience is digitized, at home, for free?

The only way you'd pay all that money for a three hour experience is if the experience gave you emotional benefits that greatly exceeded the emotional benefits that you get by staying at home.

Every Milwaukee Brewer game is televised in Wisconsin. Every Seattle Mariner game is televised in the Pacific Northwest. And yet, people pay to attend. The Brewers have Sausage Races. The Mariners just had a "Bark in the Park" promotion ... bring your dog to the game and your dog gets to run the bases after the game. At a Red Sox game, you sing "Sweet Caroline" as a collective group of 33,000 fans (so good). You attend a Cubs game because the stadium is old and decrepit ... the stadium "has history, tradition". At a Seattle Seahawks game, the stadium is designed to amplify noise ... so fans scream for the sole purpose of making it loud, which then impacts the opposing team ... and the Seahawks have the tradition of raising the 12th Man flag ... they've created reasons for you to be at the game ... they've created a reason for somebody to get in a car and drive downtown and deal with horrific traffic and sit in the rain.

In sports, the trend isn't toward a seamless experience across channels ... not at all. The trend is toward a great experience. The in-game experience, in-person, must be great. There must be emotional benefits from being at the game that greatly outweigh the experience of sitting at home, enjoying the game for free.

One wonders if this is a trend that has meaning in retail?

Might it be that a seamless omnichannel experience provides incentive for the customer to never enter a retail store? Might a seamless omnichannel experience lead to boredom, a boredom that can ultimately be better fulfilled by Amazon?

Might it make more sense for the retail experience to be so spectacular, so entertaining, so delightful, that the customer wants to get into a car and drive 20 miles to a retail store?

I mean, honestly, when is the last time you felt a thrill run down your spine after shopping Staples, Coldwater Creek, Barnes & Noble, Orange Julius, Penney, Sears? Be honest!

Time for your thoughts. Leave a comment.