August 17, 2015

Retail And Experiences


Let's briefly move to the world of sports - because in sports, we can draw parallels that make sense. We'll focus on the Seattle Mariners - a baseball team out here in the Pacific Northwest that has had three winning seasons in twelve years and zero playoff appearances in fourteen years ... FOURTEEN YEARS! None!

The team is perennially awful. The team, can we all agree, represents the merchandise. In St. Louis, the team is really, really good - as a result, they average over 43,000 fans per game, and at rather beefy ticket prices. No need to do much discounting when fans want to be in the stadium to see a winning team. But in Seattle, where the team is bad, attendance averages just a bit over 29,000 per game. 

Can we agree that the stadium (along with promotions like bobble-head days and fireworks after the game) represents the experience? In other words, a team can win, and winning is really important - but the stadium also makes a difference. The experience you have makes attending the game fun. Boston has a bad team but a great experience, hence, they have good attendance. Seattle has a bad team and a good experience, hence, they have below-average attendance. Tampa has an average team and a lousy stadium / experience, hence they have horrific attendance.

Does that make sense to you?

Look at the attendance list (click here). Eight of the top ten teams are winning a lot this year ... the other two teams have won a ton in recent years. So clearly, winning matters, a lot.

Now, if you aren't winning, you better darn well have a great customer experience. Look at the teams 11-20. Look at Milwaukee - a terrible team with a great in-game in-stadium experience. They've built a tradition and a tailgate experience that makes going to a game fun, win or lose. Sausage races? They have 'em (hint - cheer for the Chorizo). Their attendance, after controlling for the quality of the team (Merchandise), is really good.

Have a bad team and a bad experience? That doesn't work (look at Oakland).

Can we agree on the framework?
  1. Winning (Merchandise) matters most.
  2. Experience (Stadium) matters a lot.
  3. It's tough to make things work if you lack Winning and you lack a good Experience.
Ok, now let's move back to our world.
  1. Winning (Merchandise) matters most (ask JCP - click here - they add Sephora to stores & it comprises 12% of sales and helps generate a 4% comp increase).
  2. Experience (Fun, Entertainment) matters a lot.
  3. It's tough to make things work if you lack Merchandise and Fun.
Now, Macy's largely sells what everybody else sells, right? Heck, they sell just about everything available in apparel. So the merchandise may or may not be the issue - because Kohl's sells a lot of the same stuff and their results are tepid while Nordstrom sells a lot of the same stuff and full-price business isn't horrible at Nordstrom. If everybody is selling the same merchandise, then the experience is heightened, exaggerated, and disproportionately important.

Let's move to the experience. Is it fun to shop in a big old box-formatted store like Macy's? If you had three hours of free time, would you spend it having fun at Macy's, or would you invest your time in a more enjoyable experience elsewhere?

Be honest.

Now, the omnichannel thesis can work. Sure it can!

But sit back for a moment, and think about whether our application of the omnichannel thesis answers the right question. Which of the two questions below is the omnichannel thesis designed to answer?
  1. Are customers not shopping because channels are not aligned and because it is hard to do research in a mobile environment that leads to an in-store purchase?
  2. Are customers not shopping because retail is boring?
If the answer is (1), then the omnichannel thesis is the appropriate answer.

If the answer is (2), then omnichannel is feckless.

I am not confident that we are addressing the right question.

Your thoughts?