Retailers' "Digital Divide"

According to a research study, mobile shopping from a smart phone "is more frustrating than sitting in traffic or visiting the D.M.V." Get this: Some 85% of the shoppers interviewed expect the shopping experience on their phones to be as good or better than on a computer!

Wow! That's quite a high standard!

The pressure for retailers is relentless: build e-commerce websites optimized for the small screen. And while you're at it, create shopping apps. It is an arms race that just keeps escalating.

Happily, a fast pace and rapid changes are not new to retailers. (In fact, that's what attracted many of you to retailing in the first place!)

As you take on these challenges of integrating new technology into your operation, remember to take advantage of "in the cloud" services. These let you experiment without a major investment in hardware/software.

Just remember: "Don't let the perfect be the enemy of the good." It's better to be in the game than on the sidelines.

Bigger Is No Longer Better in Retailing

In our view, the current worldwide financial crisis is the final nail in the coffin of retail bigness. The age of "Bigger Is Better" in retailing is dead.  The issue here is "stores on steroids", the actual physical size of the store, not the total sales volume or the number of stores in a chain. Stores on steroids must go away!

• Retail spaces being over-sized is a leading indicator of failing retailers.  Just look at the falling sales per square foot of many chains and independents.
• Customers have been begging for more and better service, not less. But, the greater the square footage an associate must cover, the less service can be given. 
  
• Customers are insisting on newer, fresher merchandise, not piles of marked down goods. But, stores that are too big still must be filled. Malls and other developers have built spaces that independents must fill with product. This slows down turns, causing higher markdowns, thus lower margins. 

Mercifully, the use of technology in retailing has exploded in recent years. Now the urgency to cut down the lead times of supply chains can be realized with current, leading edge technology. Smaller stores can benefit the most! 

• All retailers can replenish inventories much quicker today than even a year ago. 
  
• Smaller stores can out-maneuver big stores day in and day out. 
  
• And they now can raise turns considerably and thus reduce markdowns. Maintained margins will climb! And the percentage of new, fresh merchandise on the shelves will rise!
  

But who will benefit the most with this "death to bigness"? Customers!  Especially those customers who increasingly are using the web for merchandise information and purchasing. They only want new merchandise, not old and marked down items. They seek knowledge about products and usually smaller stores can provide it best. Since online shopping is not the ultimate in service for hassle-free experiences, smaller stores will grow to be a fine alternative.

Our conclusion: The next ten years will witness the greatest growth in retailing coming from nimble, smaller stores that exploit high tech for their customer's advantage. And how refreshing THAT will be!

Are Retailers "Technology Laggards"?

We know four multi-store retailers (in 4 different geographic markets and retail segments) whose cash flow problems have landed them in the Special Credits department of their respective banks. In each instance the owners have personal guarantees on the loans. And given the economic crisis, whether any of these businesses can survive is still in doubt.

As we reflect on these 4 very distinct businesses, we recognized one shared trait: they each have very old, cumbersome systems.

• Some struggle even to get monthly P&Ls (and therefore find out many months too late how great their losses are).
• Others have very difficult purchasing systems (which tempt the buyers to place larger, less frequent orders, thereby slowing turns...and making their cash flow problems even worse.)
• In every instance, the Owner – and thereby the business – is dependent on essentially one person, either the controller or the custom software developer, for coaxing reports from the systems.

We've heard all the rationales for why this happens. Updating systems is seen as an expensive and time-consuming project, so many retailers are happy to defer that to another day. Others convince themselves that their particular segment is "very unique", and therefore the cost to have something custom-built would be prohibitive. Or, whatever custom-built solution they have had in place for the last 15 years would be impossible to replicate with current off-the-shelf solutions.

Here's the issue: Retail businesses with outdated systems are less able to spot problems in advance. And, once a crisis hits, they are less able to adapt and respond.

As the Owner, you are responsible for the survival of the business. Do your systems provide you with the appropriate information, when you need it?

Going forward, the only retailers who are "technology laggards" are former retailers!