Remarkable Retail. Steve Dennis

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СКАЧАТЬ digital disruption. But there is no denying that the diminishment of key elements of scarcity has changed just about everything that was once important in most businesses.

      Not too long ago, plenty of brands could get away with good enough. Their focus was on scale, serving the peak of the bell curve, providing average products for average people. Yet when customers have vast information at their fingertips, access to just about anything they want, whenever they want, from wherever they want, why should they settle for average, merely acceptable, unremarkable, mediocre, or boring?

      Not only shouldn’t they. They’re not.

      Our mission—should we choose to accept it—is to build new sources of scarcity that can be proprietary to our brand. These days building scarcity around information, access, choice, and connection is hard, if not impossible. Most times scarcity in items that are cheap and convenient can only be maintained for a short time. For some brands scarcity is created and protected by highly defensible patents or natural monopolies—but for most retail companies this is rarely an option.

      Instead, this new scarcity must be built around commanding attention in new, interesting, and memorable ways, creating incomparable experiences, and earning customers’ trust by knowing them better than the competition and delivering on a promise over and over again. Mostly, we need to create a brand story that moves them, that customers become enrolled in, and that they feel compelled to share, to spread, to (quite literally) remark upon.

CHAPTER 3

       Apocalypse? No.

      “Reports of my death have been greatly exaggerated.”

      —MARK TWAIN

      From recent headlines you might assume that sales in brick-and-mortar stores must be falling off a cliff. You’d be wrong. Yes, e-commerce is growing at a much faster rate, but revenues in physical stores in most major markets remain positive. Another mistaken belief is that online shopping is becoming the dominant way people buy. In fact, even with the dramatic shift of the past few years, e-commerce still represents only about 11 percent of total retail sales in the United States. The portion is expected to remain below 25 percent even ten years from now.

      So the constant media references to a “retail apocalypse” lack both accuracy and nuance. We’re all better served by avoiding painting the industry with too broad a brush or spinning false narratives.

      Yet it is true that far more stores closed in the US during 2019 than during the financial crisis. Moreover, dozens of once-prominent retail brands, such as Payless ShoeSource and Barneys, have filed for bankruptcy in the last few years, with quite a few deciding to dissolve, closing their doors forever. Others that have re-emerged are most likely only postponing the inevitable, which is one of the reasons I have been referring to Sears’s prolonged descent as “the world’s slowest liquidation sale” for quite some time.

      Years of over-building, the failure of most traditional retailers to innovate, shifting customer preferences, and market-share grabs from transformative new models that aren’t held to a traditional profit standard are creating fundamentally new dynamics. Physical retail is not going away, but digital disruption is transforming most sectors of retail profoundly.

       Physical Retail Is Still Growing

      In opposition to the retail apocalypse narrative are some important facts. During 2019, major retailers in the US opened a lot of stores—by one estimate, well over 3,500. Sales growth through physical stores was positive for the tenth straight year. Moreover, the market research company eMarketer estimates that brick-and-mortar store sales’ total incremental growth exceeded that of online shopping.⁴ While brick-and-mortar sales are growing at a far slower pace than digital shopping, the reality that they are still growing does not mesh well with the idea that physical retail is dying—or will die any time soon.

      In fact, apparently quite a few well-known retailers failed to get the retail apocalypse memo. Brands like TJX, Five Below, and Dollar General are all profitable and opening many brick-and-mortar locations. Collectively, they’ve announced plans to open many hundreds of stores per year. A little outfit from Seattle is also making a multi-billion-dollar bet that brick-and-mortar is here to stay with their acquisition of Whole Foods and expansion of their cashier-less Amazon Go format, along with Amazon Books and Amazon 4-star stores and an apparent big play in traditional grocery. Amazon sales through physical stores are already in excess of $16 billion, which is greater than those of Nordstrom, Bed Bath & Beyond, and many other household names.

       Isn’t It Ironic?

      Not only isn’t physical retail dead, dozens of DNVBs—think Bonobos, Glossier, or UNTUCKit—that once believed they could become large, profitable brands as “pure-play” (online-only) e-commerce companies are now opening stores by the score. Many are also forging partnerships with legacy retailers for physical store distribution (such as Quip at Target and Allbirds at Nordstrom). In fact, some of these brands are now reportedly generating more incremental profits from their physical stores than through their e-commerce operations, most of which remain unprofitable. As these companies have thus far cherry-picked their initial locations, often launching with high-profile (i.e., expensive) locations in the ground zero of cool retail brands such as Soho or the Meatpacking District in New York City—or equivalent hipper-than-thou neighborhoods in other top-tier cities—their ability to scale profitably remains to be seen. But what has become clear is that the future success (or failure) of many of the bigger DNVBs will be determined by their physical store expansion strategies.

      As it turns out, many customers like to touch, try on, and inspect products before handing over their cash. They like a knowledgeable salesperson to help them, or they enjoy shopping as a social event. From an economic perspective, these brands that want to expand and actively cultivate new clients are finding that customer acquisition costs are often far lower in a store than having to pay the digital tollbooth operators (Google, Facebook, Instagram). Moreover, e-commerce product return rates, which are often as high as 40 percent in apparel, usually run well under 10 percent for in-store purchases. The bottom line is that, for most retailers, legacy or disruptive, a physical store strategy is, and will remain, an essential part of creating a remarkable, sustainable business.

       It’s the End of the Mall as We Know It . . . And I Feel Fine

      For those promulgating the “retail apocalypse” narrative, another key component of their Chicken Little logic is that malls are dying. Moreover, much of the blame is cast on the growth of e-commerce.

      When the longer view is taken, a different story emerges. Regional malls—and their department store anchors—have been on the decline for more than two decades, well before e-commerce was a gleam in Jeff Bezos’s eye. The first wave of disruption arrived with the national expansion of big-box category killers and discount mass merchandisers. The most recent wave of disruption has come mostly from the rise of off-price and dollar stores. So while it’s convenient to blame Amazon and its brethren, the ascent of online shopping is only one piece of the puzzle. And due to rampant over-building, a real estate correction was sure to come at some point.

      Second, many dying or struggling malls are being killed by other malls. As growing retailers situate new stores in newer suburban areas with favorable demographics, an area’s “retail center of gravity” often shifts. A mall that was built in the ’60s or ’70s may lose relevance as more and more retailers locate closer to an area where a greater density of high-spending shoppers now reside or work. In many instances, a new mall with more desirable tenants has been built during the past decade or so to capture those sales.

      An example that illustrates СКАЧАТЬ