March 26, 2018

Tough Decisions on the Horizon

Last week we held our breath as tens of thousand of tweets from Shoptalk touted how technology will save retail.

Five years ago, we were told that technology would save retail. How did that work for everybody?

We're really good at cause-and-effect at a first-level. We can see how augmented reality might help Macy's sell something, and we then imagine a world where every retail brand used augmented reality to sell something.

What we're not good at is simulating cause-and-effect six levels away.

We can go back to 2013 when the tech vendors demanded that we embrace digital marketing to foster one-to-one relationships with customers in an omnichannel world. We were told to capitalize on the e-commerce gold mine. At a first-level, yup, that makes sense.

But then a whole bunch of things happened that we didn't anticipate.
  1. Attribution vendors mistakenly took credit for orders that would have happened anyway, giving digital channels disproportionate credit.
  2. This caused us to spend even more on digital channels than we otherwise would have.
  3. All of our digital focus caused in-store orders that would have happened without digital advertising to shift online.
  4. Once orders shifted online, store traffic decreased.
  5. When store traffic decreased across numerous brands, all stores were hurt.
  6. This caused CFOs to close stores.
  7. When stores closed, sales disappeared (though profit potentially increased). E-commerce did not pick up the slack.
  8. The brand is left weaker and smaller.
You can't blame this on Amazon. (1) - (8) above are our fault. We did it to ourselves. And we couldn't see (8) happening because we didn't simulate potential outcomes. We just remained at a first-level (digital is good and digital sales increase when you perform more digital marketing).

There are tough decisions on the horizon.

Tough decisions require us to think eight steps (or more) ahead.

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