Retailers are taking it on the chin. We all know this. But every dollar lost by a retailer X has not gone directly to Amazon. The straight line to Amazon wow Jeff Bezos is a genius. This is a lazy notion. We tend to do that in America. Take something complicated and reduce it to a shallow sound bite. Amazon cannot be blamed for the decline of everyone else. Even if Bezos’ dream is no employees, tacky warehouses in the sky, and owning all industry. Just last week Amazon announced its intentions to compete with FedEx and UPS. Shortly after jumping head first into brick and mortar by purchasing Whole Foods. This guy is on fire for sure and he isn’t messing around. What he is doing is noteworthy and amazing for sure. But to be clear I see him as someone who has kept moving forward at a brisk pace and passed countless competitors who decided to stop moving completely years ago.
Huge factors for the broad retail woes include the fact that income inequality is hitting millennials and generation-x hard. To have a consumption economy the broad volume of population, namely the lower and middle classes, need excess income to be able to participate and consume. People are getting by and barely. It is not the millennials fault that they cannot afford to buy a house and fill it up to the brim with stuff. Retail is changing. The wants a needs of younger people are changing. Stores need to be an attraction and the experienced changed. The so called new malls are doing well for this reason the focus is shopping experience and service. The argument for huge retail square footage and lots of inventory doesn’t make sense in 2017. There is not enough foot traffic to justify. There could be but there is not. All these factors the industry is adjusting to. Very slowly.
The one idea I would like to pick at and focus on in this post relates to who runs retail brands these days compared to what made a brand successful originally. America has lost its sales swagger. We suck at selling stuff. By selling stuff I mean creating genuine interest and desire for new and quality products that you were unaware of previously. It is common place for people to make fun of and ridicule sales people. But they are important. Or at least they were. Without sales, a company has nothing and being in sales is not easy. Rejection is the norm and sales cycles are slow. Results are slow. Plus, you need to be charming and likable and believe in what you are selling. Somehow America has turned something that drove commerce into something perceived as sleazy or dishonest. It was an important equalizer to hyper competition.
Who runs retail companies these days? Passionate product innovators? Devoted brand believers? No most of the time now it is an equity firm or a conglomerate of something somewhere else after the original owners and creators were long gone four sales ago. For these operations, a brand rejuvenation is not possible because there is no real passion. It is all when the bond debt must be turned over and balance sheets and budgets. No thought to true sales and advertising or promoting individual products. Short term results driven executives that might be able to manage the status quo so the brand remains in the black a couple more quarters. But very little in the realm of what is needed for a true turn around. It is not a surprise that so many great brands went bad shortly after the original entrepreneurs sold. I mean after a company has been sold and restructured a couple times hasn’t it lost the original character and values? Most of the time yes. How can a brand be focused on when the parent corporation also runs 25 other brands?
Having heard the news about Toys R Us I kept thinking about this topic. They are owned by Bain and KKR which are equity firms and the company has $5 billion in debt. Not surprised they aren’t very good at selling toys. They couldn’t make being the only toy retailer in America work. People can cry Amazon and this and that but the truth is they are bankers and bad at selling toys. Turning around Toys R Us would mean recreating the experience of going to the toy store and doing better at selling specific toys by creating stories around the brands. Catering to the age groups and individual pockets of specific enthusiasm. Like the way a good salesman would create interest in whatever. Toys R Us has a built-in gift most companies do not have. The fact that new sets of customers are being born every day in America, and they are the only toy store in America, and kids love toys and possess natural innocent curiosity. The new customer funnel for Toys R Us is a gift whereas most all other products create them from adults. But they couldn’t do anything with those competitive advantages because they are not sales people. Or they don’t care about the brand enough to invest in it. Or the long-term debt is so much the business is run on the banking side of the street. They had the clout, the time, and the resources to do it.
Working in marketing I can say first hand the focus is rarely on selling or creating interest in specific products for specific subsets of customers. Despite what you may hear that to the contrary that sells the notion that data science makes sales growth the prompt result of advanced math and statistics. Instead it is mostly empty tactical work to send the same promotional materials. Content that is push marketing instead of pull marketing. Content that says or does very little beyond making the statement that “we exist and sell stuff.”
It is important to note that analysts must work much harder with data to effectively sell more stuff in retail than in other industries such as healthcare or insurance. Because while you will definitely need that medication to live with your condition, or insurance for your house in a flood zone, you definitely don’t need that 14th pair of pants. Instead you need to be sold why the unnecessary pair of pants is awesome and will make you awesome and why all other pants are inferior. Retail has lost that edge.
Amazon is capitalizing on the fact that everyone else has forgotten how to sell and create loyalty. Instead come to our wonderful product and take your time selling yourself because we have every conceivable product available to you once you decide at a competitive price. No selling required, great service, and cheap no thought no action two day delivery.
When a brand first takes off what is usually the magic ingredient identified after all the layers are peeled away? Usually a human with passion who is offering something they think is so good it practically sells itself.