Must Retailers Pass Through the "Valley of Bankruptcy" in Order to Change?

Last week, we received an email from a long-time follower of The ROI. It included a comment and a question that you, too, may have wondered:

"How do you go about changing the mindset of the owner/CEO about GMROI, inventory management best ideas, etc?

Our CEO stills buys by intuition, hunch, seat-of-the-pants. He likes to use phrases like: stack-em-high, watch-em-fly. One-to-show, one-to-go.

Can CEO's go from mediocre to great, or do they have to pass through the valley of bankruptcy first?" 

Quite a question, isn't it? Speaks volumes about the underlying concerns.

Thanks to what we call "Retail Darwinism", those Owners & CEOs who still "stack-em-high, watch-em-fly", who buy by hunch and intuition, are in fact disappearing.  They are not making the "mediocre to great" transition. Is the "valley of bankruptcy" the only alternative?

"Am I running this business...or is it running me?!?" 

Every case is different, of course. In our work with retailers in "turnaround" situations, we've found that the fear of impending failure, the acceptance of being on the brink of bankruptcy, can prompt changes.  Of course, sometimes it is too little, too late.

Then there are the times that fear is more paralyzing than motivating. These retailers simply do not appreciate how much control they could have!  Not able to recognize their alternatives, they become frozen in the headlights. This is especially true for those who have delegated the "accounting and financial stuff."

So, how can Owners and CEOs be motivated to change? It starts with increasing their financial skillset and confidence. Enabling them to have a positive answer to "Am I running this business…or is it running me?!"  Knowledge IS power! 

That's not to say that Owners & CEOs need to do all of the accounting and bookkeeping themselves. Far from it!

But since Owners are responsible for projections, for playing "what if…?" about their business, they must understand the cause-effect financial levers in their business. That's how they can be empowered, better able to respond as the business environment changes.

Emails such as this one cause us to redouble our dedication at The Retail Owners Institute® to help retailers "Turn on their financial headlights!"  The ROI's goal remains: "Eradicate retail bankruptcies!"

Big Box Store's Dilemma: Great Customer Service...for Amazon's Customers?!?

Ironic, isn't it? Big Box stores are being morphed into specialty stores.

Not so long ago, shoppers were using the specialty stores and their knowledgeable staff as their source for knowledge about the newest products...and then buying from the Big Box stores! The specialty stores were the "showrooms" for the Big Boxes, who as low-cost providers, could offer lower prices.

This is a long-standing "specialty store dilemma": hire, train and keep a knowledgeable sales staff who can educate the consumer about new products (aka "great customer service"), only to lose the sale to the lower cost, lower-priced competitor. This has been long known to specialty retailers in all retail segments, whether audio/video products, art supplies, power tools, whatever.

But now, look what's happening to the Big Box stores. Customers go there to see, hear, and touch the latest products (think Best Buy), so they can decide which one they want to buy. Then - customers being customers - they buy it at a lower price from online providers (think Amazon)!

The Big Boxes have become the "showroom" for the online retailers of the world! In their efforts to provide better customer service, the Big Boxes incur added costs (both in-store for people as well as robust web sites chock-full of more information) only to lose sales to the new low-cost providers of the world.

What goes around, comes around.

Or, consider the impact of category killers like Barnes & Noble and Border's Books on independent bookstores. Now these "category killers" have become dinosaurs themselves. Increasingly, more books are bought online, and/or in digital form, for a lower price at greater convenience.

Retail Darwinism at work.