February 12, 2017

Measuring Retail Challenges

This is a table I enjoy producing for my retail client base.

The table tells us why a retail store is struggling.

I segment customers based on last year's behavior. Then, I measure where customers spend money in the next year.

If we have a fox / rabbit issue (digital eating retail), then we'll see that retail customers are spending less and less in retail by year and more and more online by year.

If we have a Unique Point of View issue, then we will see that there are fewer new + reactivated customers by year.

What do you see, in the case of this store?

You see a Unique Point of View issue. New customers are constantly on the decline.

In this example, the store is slowly dying (2% per year), and the store is slowly dying because the store is being starved of new + reactivated customers. This store has a Unique Point of View issue.

There is a reason I harp on this topic (Unique Point of View). I know you don't like hearing about it, because you send me emails telling me I'm wrong! Unfortunately, I have a ton of data from e-commerce brands, retail brands, and old-school catalog brands that explains just how important a Unique Point of View is.

The trade area around this store (rank-order zip codes until we get 70% of sales for the store) is being starved of new customers. That's the problem (in this case).

P.S.: Take a look at this image.

Yup, those are online orders literally "hanging around" an upscale store, waiting to be picked up. That's the fox ... invading square footage previously reserved for selling. Now, I get it - you can credit the store with those sales and not the online channel. It doesn't change the story - if somebody told you ten years ago that an "A" shopping center would sacrifice selling square footage to become a nimble distribution center, retail experts would have vomited into a dumpster.

This use of square footage drives the declines in the table above - leading us toward this dynamic.

  1. Retail Works.
  2. Digital Invades.
  3. Retail Serves Digital.
  4. Retail Suffers.
  5. Stores Close.
  6. Digital Suffers.
We need to measure the dynamic - and we need to do something to stop (4) from becoming (5) and then (6).

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