It's the technology stupid!

In my previous post I promised to stop complaining about the state of retail today, and to outline how I think successful retailers will operate in the future. With the understanding that the future of retail starts…right…now.

Not that anybody in the world of Big Box retail is noticing, they are still perplexed about what’s happening with the economy and obsessed with figuring out when things will go back to “normal”.

NEWSFLASH: This is “normal”.

Okay, so maybe I’ll keep complaining, but that won’t be all I do.

I’m trying to divine what the retail landscape will look like in the very near future. The Big Box format will continue its decline as post economic meltdown consumers look for new ways, and new places, to spend less money.

The Big Box model can’t survive a slow growth economy.

What will survive, and actually thrive, are smaller retailers and regional chains which continue to be profitable in the absence of growth.

These smaller players, without the burden of excessive debt and short term shareholder demands, will continue to gain market share as they capitalize on the opportunities created by changes in consumer attitudes and buying habits. These smaller, smarter retailers will succeed by using tools and techniques developed by the Big Box industry to dramatically shift the market.

One area where smart retailers are gaining a competitive advantage is through the use of appropriate technology.

I’m not talking about using the latest technology, or having technology as the focus of the business, but using those technology tools which make the business more efficient, and which increase the joy a customer finds when buying.

History can show us how to use the best technology out there to improve business processes. One of the things Big Box retailers did very well was to integrate all the different parts of their organizations through the use of technology. The systems, and the best ways to use them, are in evidence everywhere in retail today.

Global sourcing, electronic ordering, supply chain management, assortment maximization and pricing schedules can all be improved thorough the use of readily available hardware and software solutions.

Second and third generation programs, based on propriety systems developed from scratch and at great expense by the Big Box industry, are now available to any size retailer at a fraction of the original costs.

Smart retailers will use these best in class systems and will piggy back on the numerous industry protocols set up to serve the Big Box industry.

Products contain RFID chips to make Wal-Mart happy. Those same chips, and the costs they save for shipping and receiving, are available to any retailer with an RFID reader. Any retailer can use the same inventory control systems as the Big Box stores because they have done the ground work in forcing suppliers to integrate tracking options into their products.

Vendor managed inventory “solutions” now required by large retailers actually allow smaller players to purchase at lower prices. Big Box stores are forcing manufactures to carry extra inventory in forward warehouses. Manufactures are then selling some of the same products to smaller retailers as a way to offset the inventory carry costs thrust on them by their Big Box customers.

This same logic, of using what the Big Box industry built to lower your own costs, exist in automating payroll systems, labor scheduling, training curriculum and inventory management.

It’s just like the Apple commercial states: “there’s an App for that.” The scope of what’s available is immense, it far exceeds the list of what’s needed and there in lies the rub.

Successful retailers will use any and every tool that will help them do a better job, but they will not use a tool simply because it’s there. They will take stock of what’s needed and use only that technology that can make the store run better, lower operating expenses and help delight customers.

On the merchandising side of the business, smart retailers will stay on top of how customers develop and use technology.

They will adapt their stores, their product mix and their service offerings to match how customers want technology integrated with their shopping experience.

Smart retailers will make their stores wifi hotspots. They encourage customers to download information regarding the products they carry. They will let them use smart phones to check offers from competitors. Since the customer will find out how you stack up soon enough, better to have them do it in your store.

By encouraging comparison, it gives retailers the chance to highlight advantages and it gives them instant learning about what the customer thinks is important.

Successful retailers will stay involved in social media. They will use social formats to start conversations on-line about their company. Social media forums allow retailers to answer consumer questions, to respond to complaints and to thank customers for complements.

Successful retailers will use technology as a way to engage customers as well as a way to sell them.

Big Box also created nearly unlimited ways for any retailer to collect any data they want, and then to analyze what was collected. From simple purchase histories to detailed permission based personal preferences, retailers can collect information about customers and even non-customers. Smart retailers know who buys and who doesn’t buy. They use data mining programs to find out what else they might buy. They constantly test strategies and tweak messages to find out what works, and what doesn't.

However, successful retailers also know that information is not he same as knowledge.

Smart retailers will take the information these sophisticated systems can provide and balance it with a little common sense and all the wisdom they can muster. Information based decisions are usually shortsighted and often dead wrong.

Information, put in the proper context, produces knowledge. Collect the information, use the knowledge.

So that’s more than enough about how smart retailers, the ones that succeed in the future, will be dealing with technology. I expect to see more and more, smaller and smaller, retailers adapting Big Box technology as the backbone of their businesses.

Next on the list is a look at how smart retailers maintain a maniacal focus on the customer.

So what's your big idea?

Bitch! Bitch! Bitch!

For months now I have been railing against the unwillingness of Big Box retailers to adjust to the realities of the postconsumer meltdown economy. I have berated them endlessly about their inability to adapt as drastically different consumer attitudes emerge. I have predicted the death of the Big Box Store model because growth, as defined over the last 30 years, is no longer sustainable.

Much of this ranting arises out of the frustration I experience daily on the selling floor of my Big Box employer. I deal with the customers, who to me are actually real people, stressed out about losing their jobs, their homes and their retirement savings.

I stand there helpless as they walk through my store relatively empty handed because my Big Box corporation can only offer low prices.

Today’s consumer is not all that interested in low prices from my Big Box store, they can always get lower prices at the Super Discounters, on line, or at any number of non-retail outlets (think E-bay, the thrift store and Craigs list).

What they want is value, as they, the customer, define it.

They want the right products, at competitive prices, and above all, they want somebody in the store that can help them buy the right products. They want service.

Beyond a few poorly written emails, a couple of badges for my vest and a new advertising campaign, my Big Box Company has not been able to do anything to capitalize on the opportunities offered by this post meltdown world. They talk the talk, but in their panic, they have overdone their commitment to controlling inventory costs, reducing labor expenses and putting short term shareholder gains ahead of long term shareholder value, so they are unable, or unwilling, to walk the walk.

Great!

I’m a super genius because I can see the problems and the disastrous effect they will have on the Big Box industry. I get to wear a great big I TOLD YOU SO !! button in a few years.

The real trick would be to figure out what type of retail model will be successful moving forward. Okay, Here’s goes:

The successful retailer will be focused on organically growing their business over time. They will run their businesses to make their customers happy, while turning a profit and providing meaningful employment.

Notice what’s missing from that definition? There is no mention of “increasing shareholder value”, there is no “Commitment to Excellence”, (who starts a business to be mediocre?), there is no talk of “Employee Empowerment”.

Growth is defined as a result of running the business properly, rather than being the objective for being in business.

The overarching objective is to make money while making the customer happy. Not just focusing on the customer, or giving the customer what they want, but in making them happy. Delighting the customer rather than servicing them.

Employees are granted access to a meaningful job, as the employee defines it. This of course assumes they want a meaningful job. If they just want a paycheck, then Micky Dees is always hiring, so you don’t need to bother with them. Successful retailers will work hard to find the right employees, train them continuously and compensate them competitively.

The successful retailer will be:

ð Committed to utilizing appropriate technology

ð Manically Customer focused

ð Employee engaged

ð Community centered

ð Sustainably operated

Each of these points is a critical component of what I think a successful retailer must do and I intend on pontificating about each of them in detail over the next few weeks.

Stay tuned!

“HELP!!!” “I’ve been EMPOWERED and I can’t get up!!!”

The Big Box retailer I work for recently held their annual Pow Wow to celebrate what the company achieved in 2009 and to unveil their big plans for the rest of 2010.

Big Box retail loves to develop detailed plans, rolled out with theatrical flare and ambiguous nomenclature.

These plans are normally based on incorrect assumptions, flawed conjecture and a lot of information with no knowledge. They are therefore grossly inadequate at helping associates manage their day to day struggles.

The speed at which business changes means that any plan, especially the ones that are grand in nature and extremely detailed, are out of touch with the realities in the store before the first PowerPoint slide splashes on the 100 foot plasma screen.

But no matter.

Since these plans look good in the annual report or in the boardroom, they are followed to the letter by managers who don’t understand them, but who are too frightened to question them.

All of my senior management was at the meeting. Everyone from the store mangers on up. Some 2,000 people crammed into a giant conference room in the bowels of a random humongous casino in Las Vegas.

I can’t help pointing out that a Las Vegas casino is the perfect allegorical setting for introduction of the company’s 2010 plans.

Given the fact that the current business environment is completely unstable, what the company is actually doing is placing a huge bet on whatever plans they have dreamed up in the Ivory tower.

Just like in Vegas, the odds are not in the bettor’s favor.

I was not in attendance at the annual meeting so I have no first hand knowledge about what the company is actually planning to have us lowly hourly associates do. The information I have gotten so far consists of a nearly incomprehensible memo from my store management and whatever snippets I can glean off the employee website.

I am left alone to read the corporate tea leaves and try to divine what I am supposed to do in 2010 to contribute to my company’s success. Here’s what I think I have figured out so far:

· I am supposed to participate in a Service and Sales Offensive. I am to provide service, and the sales will follow. I am not sure, but I think I am supposed to provide that service in an offensive manner.

· I am supposed to stop making it so difficult for the customer to make a purchase.

· I am supposed to get rid of bad habits. (I’ll start by not eating ice cream right before I go to bed).

· Wait, page three of the memo says I am expected to have a focus on sales. Maybe I am supposed to focus on the sales that don’t occur following my offensive service?

· I am supposed to do things differently because change is good.

· I am supposed to buy into what the company is trying to accomplish.

· I am supposed to have a positive attitude about the changes I am making and whatever it is I am buying into.

To help me understand the steps I am supposed to take to help the company achieve its objectives for 2010, I have been given some interesting facts that provide support for the steps I am taking.

• 37% of customers shop in my store and purchase elsewhere. (I think I am supposed to be happy about the 63% of customers who buy in my store or maybe I am supposed to ignore them and focus on the 37% who are going somewhere else.)
• Customers like clean restrooms
• Customers don’t care about selection and price anymore; they are looking for better service. So we are expanding the products we carry and lowering the prices on hundreds of items across the store, while limiting future hiring to part time staff only.
• Customers want someone to listen to them. (I think I am supposed to find my customers other customers to talk to).
• Customers have high expectations about everything.

Well, one thing is perfectly clear, I have no idea what the company’s objectives are for 2010 and I have no clue as to what resources I have been given to help the company achieve those unknown objectives. I know that I am supposed to make changes regarding how I do my job, but I have no idea what those changes are supposed to be.

But that isn’t the worst part….not by a long shot.

I’m not sure, the signals from the company are still fuzzy, but if I am not mistaken, I think I have been “EMPOWERED”!!!

Telling your employees that they are EMPOWERED is just another way of way of telling employees; “Sorry, you are all on your own!”

If you are EMPOWERED you are allowed to do anything to make the customer happy…except for the things you are not allowed to do.

Being EMPOWERED as an associate is kind of like being a dog wearing a shock collar hooked up to an invisible electric fence.

Like the dog, you can’t see exactly where the boundaries are, the fence being invisible and all, so the only way to know how far you are allowed to go is to wander around until you get a painful, bone jarring electrical shock.

But unlike the dog, the EMPOWERED associate’s boundaries are constantly changing. One day you are allowed to offer a customer free shipping to meet a competitors offer and the next day ZZZZIIIZZZS, you are reprimanded for offering a customer free shipping to meet a competitors offer.

For three weeks you re-arrange your hours to better service customers and then one day, ZZZZAAAAPPPP!!!! you find that you are forbidden to work anything other than you written schedule without three days notice and the signatures of corporate management four steps up the corporate ladder. Since you have violated policy three times, you are informed that the next time it happens you’re fired.

After a while you become even more like the dog who, after being shocked enough, just sits on the porch all day. It’s better to stand around and do nothing than to try to do something, which means perhaps risking your job. Maybe you’ll get fired, you don’t know, and that’s the point. Being EMPOWERED actually increases an associate’s powerlessness by filling them with a form of job loss paralysis.

Being EMPOWERED means that you can not be successful. If you don’t break the rules to help a customer you are subject to dismissal, but if you break the rules to help a customer you are subject to dismissal.

Heads you loose, tails you loose.

Vegas would love to have its gamblers EMPOWRED. The odds are not just in the houses favor…there are actually no odds at all. The gambler (or the associate) looses 100% of the time.

Being EMPOWERED is another symptom of the demise of big box retail.

Empowerment is just another way of the corporation saying:

“Hey, we have absolutely no idea of what to do. We can’t come up with anything better so why don’t you guys at the bottom of the pay scale just take your best shot? Maybe it’ll work?”

Big Box retail loves to talk about how empowerment helps associates by giving them more control over their day to day activities. Big Box raves about how associates love the fact that they can take “ownership” in the company’s future success and how much better it is for management to have loads of EMPOWERED associates running around the store, since EMPOWERED associates can practically mange themselves.

Really?

I love not knowing what the rules are day to day?

I love not knowing if something I did (or didn’t do) two weeks ago is finally going to come to the attention of somebody who thinks my actions were reckless and I am shown the door?

I love “owning the store” while being paid in a year what my CEO makes in a day and a half?

If I have so much power, then where is my compensation for wielding that power?

If I, as an hourly associate, am EMPOWERED to take control of how my store operates and how the company’s customers are serviced, then why don’t I get the paycheck that the people who used to have that responsibility got?

Seriously, where is my money?

Last year, one of the worst in the company’s history, the top five executives of my big box retailer received salary and stock totaling $101.3 million. They averaged $2,026,000 which is exactly 65 times my annual take. The top dog took in $3.84 million which tops what my EMPOWERED ass got by 120 times!

The way I see it, being EMPOWERED is just another way for me to take on duties that used to rest with mangers up the food chain. Ok, then why not pay me some of what they got now that I am doing some of their job?

Like I said, the information trickling out of the corporate brain trust regarding what associates are supposed to do in 2010 is still sketchy.

Additionally we are into the second month of 2010 and we still don’t know what raises, if any, we may be getting.

Is it too much to hope that somehow the new responsibilities for associates are aligned with increased compensation for taking on those new responsibilities?

Probably.

If I have been EMPOWERED, then God help me! I don’t know how I’ll find the strength to do my job while shouldering the burden of the company’s 2010 plans.

Maybe the company will give me a button that says, “don’t bother me…I’m EMPOWERED!”