March 09, 2017

Time For A Rant Defending Retailers & Catalogers

Alright my friends, I clicked through to this article because it had content regarding MailChimp and I like the work they do and I like their company culture ... so I read the article (click here to read the article).

And then I became angry.

Now, is the author necessarily wrong? No! 

But the advice does not help my client base. Not. One. Bit.

There's a common theme right now, and it goes like this.
  • Retail and Catalog employees are stupid.
  • Vendors and Thought Leaders and Researchers and Trade Journalists are smart.
  • Vendors and Thought Leaders and Researchers and Trade Journalists have the answers.
  • Vendors and Thought Leaders and Researchers and Trade Journalists can beat up Retailers and Catalogers because it earns them page views - page views that may lead to solutions that dumb Retail and Catalog employees will pay for.
  • The solutions are to "be more digital" and "engage" customers ... and this is done by "tearing down silos" within companies enabling companies to be "agile" ... among other things.
The solutions are tactical.

The problems, of course, are structural.

Allow me to give you an example.

Let's pretend you are a mall-based retailer like Ann Taylor. Let's pretend that you do everything the author of the article demands of you. Let's pretend that you become as digital as you can be. Let's pretend that engage customers, and concoct great branding strategies. You work with approved agencies and you implement omnichannel strategies that the vendor community demands you implement. You spend tens of millions on all of this stuff.

Will it matter?

What do you do when JCP nukes their business model and attempts an Apple-Lite strategy and 30% of foot traffic at JCP leaves - costing you foot traffic because JCP is an anchor store? No amount of engagement overcomes the traffic that left because JCP made what turned out to be terrible decisions, right? How is this Ann Taylor's fault?

What do you do when Macy's becomes intoxicated with the vendor / trade journalist / researcher / thought leader spell known as #omnichannel? What do you do when Macy's invests money on a theory that doesn't pan out ... resulting in Macy's closing stores and resulting in less foot traffic in Ann Taylor stores because Macy's is gone? No amount of engagement overcomes the traffic that left because Macy's followed a failed omnichannel thesis? How is this Ann Taylor's fault?

What does Ann Taylor do when the pundits tell Ann Taylor to be "digital or die" ... and so Ann Taylor employs digital strategies ... and those strategies cause the customer to shop Ann Taylor online and not go into a store ... causing average stores to perform below-average and causing below-average performing stores to become unprofitable? The very digital strategy Ann Taylor was told to follow (or die) results in sub-standard performance in stores ... which will result in the closing of stores. No amount of engagement overcomes the traffic that left because Ann Taylor did what they were supposed to do and became "more digital". How is this Ann Taylor's fault?

The solutions are tactical.

The problems are structural.

Few people have solutions to structural problems. If people had solutions, then Sears would be growing.

There are a few things that we can do to fight structural problems (but we aren't going to solve structural problems).
  1. We can focus on our merchandise assortment. Think about how the fast fashion folks overcame structural problems by forcing customers into stores by turning the assortment over fifty or more times a year. The momentum of the merchandise assortment overrode declines from structural problems.
  2. We can focus on finding new customers. This goes against everything you've been taught - you've been taught to encourage customer loyalty. But new customers are the lifeblood of our future - without new customers, we don't have a future.
  3. You can employ vendor-centric tactics within your customer acquisition strategy. Be as digital as you like. Engage prospects. Employ branding strategies. Do everything the author of this article recommends (click here). But please understand that these are tactical methods that support your customer acquisition strategy - not groundbreaking strategies that transform your business.
  4. You can forecast the impact of structural changes 1/2/3/4/5 years out.
  5. You can position your company to be financially viable five years from now based on the results of your forecast.
This brings me to catalogers.

There isn't an industry that has a roadmap for structural change that retailers should pay more attention to than the catalog industry.

About a third of my readership works in the catalog industry. These folks have been through the wars, and they know what the outcome of structural change looks like. E-commerce routed catalog marketers. There are very few strategies that can offset structural change. Catalog marketers weren't stupid. They moved to e-commerce. But they also had to protect the core business (which at the time generated all of the profit) - and protecting the core business generally provides short-term benefits.

The result of structural change on catalogers?
  1. Younger customers left catalogers to shop e-commerce (just like customers are leaving traditional retailers to either shop online or Amazon or newer retail brands).
  2. With older customers left, the merchandise assortment evolved "old" very quickly.
  3. A merchandise assortment that skews "old" dissuades younger customers from shopping, creating a feedback loop.
  4. The feedback loop separated catalogers from the digital ecosystem, further accelerating the shift to older customers who appreciate offline marketing.
  5. Catalogers clobbered the algorithmic source of new names (co-ops) ... deflating performance. At the same time, with few younger names added to co-ops, the co-ops became less effective, creating a new customer acquisition feedback loop of ever-declining performance.
  6. Catalog consolidation happened (and is happening) - with a handful of companies gobbling up catalogers to generate a list of the "magic 8,000,000" catalog-centric households. I called this the "Abandoned Warehouse" (click here). Retail may well consolidate as well.
  7. Cataloging became a niche industry catering to older offline customers in rural areas.
Now, catalog professionals aren't stupid. They largely employed the tactics that vendors / trade journalists / researchers / consultants / pundits told them to employ. It's just that the tactics cannot offset structural change.

We should defend retailers and catalogers because there are very few tactics that can offset structural change. These folks are pushing a boulder up-hill. It's easy to go work at an online e-commerce brand that is growing organically - you look good even though you didn't do anything special. It's hard to work in an industry dealing with structural change - your work may well be great and it won't matter one bit. It takes courage to go through this process.

It does not take courage to demand that employees in structural change industries focus on "engaging" customers.

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