Archive for January, 2009

In the face of online sales and a slowing economy, can retail stores be saved? I’m really beginning to think “no”.

Now when I say “retail stores”, I am generally referring to big box type specialty stores (your Best Buy’s, Home Depot’s, Lowes, many “strip mall” type stores, the stores in your local mall… etc – those kind of places.) I am not referring to all retail. Because, let’s face it, we’ve been doing face to face trading with merchants for thousands of years, and we’ll be doing it for thousands of years to come.  

Heck, on that note, I’m sure merchants traded (and people bought) even during the Inquisition and the Black Plague, so a little recession and the internet will not kill all retail (in the interest of full disclosure, I feel I should mention that I have, on occasion, wished Black Death  – or Inquisition, I’m not picky – on rude retail clerks. But I digress.)

I also think the giant “all in one” places like WalMart and Target will survive. However, they do most of the things I’m about to complain about fairly well.

But some places are in big trouble.

To begin, retail is generally in trouble not just because of a slowing economy – it’s  because of a slowing economy and online sales.  It’s a serious double whammy that has already claimed the life of electronics retailer Circuit City (while Amazon dot com is doing pretty well.)

So let’s establish a premise – online sales are generally hurting retail stores the most. Good?

Now let’s figure out WHY that is.

I will tell you, it’s not price. Any good salesperson worth their salt tells you that price isn’t the key component in buying. Oh sure, there’s always going to be some schmuck who brags in an online forum that he “goes to see the product in the store, then goes home and buys it online for 6% cheaper.. yay me”  That’s always going to happen – idiots like that will also spend $10 in gas to save $5 on an item. They’re assholes, and a scant part of the marketing equation.

So, price isn’t the big reason people go online… what could it be??

How about convenience?

Ok, now we’re getting somewhere… talk to any online shopper, and the first thing they’ll say is how convenient it is. “Point / Click / Buy” – wait a few days, and your item is delivered.

But how can waiting a few days be more convenient than getting the product right now??? Well, here’s where the shooting themselves in the foot comes in.

In the last few years, in the face of increased online competition, retailers, on a whole, have actually made it MORE inconvenient to shop at their stores. They have decreased inventory on all but the hottest sellers (meaning the stuff you want probably isn’t in stock), and they have decreased staff, meaning it takes you forever to get out of the store. They make things harder to buy, they skimp on floor help, and they make register transactions a grueling “point of sale” process by offering everyone magazine subscriptions, buyer’s club memberships, and extended warranties.

Now, I’m sure some weenie in Dockers and a golf shirt (hey, it’s Casual Friday) will explain to me that above is necessary in the face of softer sales. That the revenue generated per square foot has to equal a pre-described amount of inventory turns while maintaining a certain exponential percentage of associate expenditures (“cashier pay” to you and me) while still generating an increased amount of gross margins.

To which I say “Shut the @#$% up Mr. Regional Manager and get your lazy, Dockers-wearing ass behind a register and start ringing people out.”

Because that’s what it boils down to. Lots of talk, lots of powerpoints, lots of spreadsheets, and only one cashier to ring people out.

You know what, retail? You did this to yourself. You should be EXPLOITING the “get it right here, right now” angle to the fullest. But you aren’t – you are actually making it more unpleasant and more of an ordeal to shop at your stores. 

Ok, enough complaining. I’m a solutions guy, so let’s offer some solutions.

Those of you who know me and know my work understand that I’m all about simplicity. Many times, the solution for business ills is not complicated, regardless of company size. Sometimes, it’s not about spreadsheets or trying to reduce logistical expenses or any other topic that gets talked about in a room full of golf-loving business guys. It’s about the front lines, and what the customer wants.

Here are some “Dan Style” solutions:

• Retailers need to take a look at their stock and start offering “more” stuff. I realize this flies in the face of what they now do (get rid of slower moving items for faster turning stuff), but what that does is it creates an atmosphere where nothing is special. My local supermarket has pretty close to the same general DVD selection as Best Buy.  Online sales thrive because I can buy anything. I realize stores can’t carry everything, and that inventory turns are important (I ran a store, so I know the drill), but it’s gone way too far in the last several years. If it’s anything but a mainstream item, I won’t even venture out anymore, because I know nobody will carry it. That’s bad.

• More cashiers. No nice way to say this, but find a way to increase store payroll. I come to a retail store because I want the item now, and I want to get the heck out of there. The regional managers can argue all they like about this one, but the fact of the matter is their stores are failing – what they are doing isn’t working. Cutting cashier hours / payroll has been a pet project of retailers for years, and it’s not helping. You have to get me out of the store. Target can get me out of there – why can’t Home Depot?

• Related to the above, stop making the checkout process a sales pitch. Stop offering warranties at the register, stop selling magazines at the register, stop offering your store credit card at the register. It’s driving people away, because, combined with your one cashier, they have to wait forever to get the heck out of your store.

• A group of smokers on break right outside your front door is a turnoff. Sorry about that, but it is.  

• I understand theft is a problem, but you have to stop hiding stuff. I want to buy a game/dvd box set/ink cartridge… and I have to hunt down a clerk (who is probably on break having a cigarette out front.)  Really… didn’t you invest in those alarm thingees at the front of the store to stop theft? Or were they just to annoy paying customers whose item’s security tag didn’t de-activate?

• Lastly, if you MUST hide stuff, can you at least tell me where it is? I go to where you keep your x-box games, looking for the new title. It’s not there (because they are all locked away up front.) Maybe a sign, or an empty box, or something telling me “we hid this, look over here instead”. Yes, Best Buy, this is aimed at you.

I’m not sure if the above solutions will work – maybe it’s just the natural cycle of things. The internet is going to kill many newspapers; maybe big box retailers can’t do anything about it. But I have to tell you, right now, they aren’t even trying.

Have a nice weekend, everyone.