Problems in Retail

I was asked recently (during an interview) what my view of the retail world was – as an open-ended question and not focused on the aspects of how to use technology to provide a solution, I stumbled over it.  It was playing at the back of my mind, and I realized why I stumbled – the question wasn’t centered on the solution, it was a general view of what’s happening in the retail space.

Some who know me may remember that I tend to view things from a perspective of biology (blame it on my university degree, but regardless of source, it’s still true).  The current consumer climate is very much an ecology – but where a biological ecology is driven by energy (in the form of solar, captured by plants and exploited in a long chain of herbivore-carnivore relationships), our economy is an ecology driven by money (generated by work applied to raw materials, modified by value instilled through psychology).  I’m going to refer to the driver in this context as “fuel” – whether it’s energy or money, it is the fuel on which the respective ecology runs.

Any ecology is driven by the flow of its fuel among the constituent living creatures in it.  From sun to plant, plant to animal (or for you nit-pickers out there, fungi or other plants), and them among animals and even in the recycling of waste materials, fuel in a system drives its movement.

In the case of the retail environment, the flow of fuel has been dramatically cut back at the base of the food chain – the consumer.  Enormous and sustained job losses, cutbacks on welfare programs, and the outright theft of retirement funds by institutionalized fraud have stopped a large amount of the flow of fuel into the system.  This has produced, not surprisingly, a drought that is being felt up the food chain – consumers aren’t buying with the same cash they used to.

As a result, retailers are finding their revenues shrinking, in some cases with alarming rapidity.

Unfortunately, those same retailers can’t change anything in the system (unless they want to spend some money buying a few politicians with the idea of introducing more money into the system instead of shielding CEO wages for a change).  So they have to do what animals do in such a situation – adapt, and do better what they do than the others in the same space.

In the case of a retailer, that means communicating the value of the products they offer more effectively.  In the end, that’s really all a retailer does:  communicate the nature of and deliver their products.  Of course they also sell those products, and provide showcases for them, but the value they really add to the product is their ability to communicate and deliver to the customer.  Their manufacturers already sell, and if pressed will enter the distribution business – there are more than a few manufacturers who sell direct.  It is in the communication arena where retailers provide value.

Specifically, the communication needed is to give the consumer of the product the knowledge (or the long-term perception of knowledge) that he or she is making the best-informed choice for the expenditure of his or her money, and to do so in a way that the consumer associates the knowledge provider with a sense of trust.

To delve a little into the psychology of selling, a customer can have all the perfect intellectual knowledge and confidence in the world, but when dragging out the wallet, the brain kicks into something akin to the “fight-or-flight” emotional state.  All that confidence gets shaken when money’s on the table.

Having built up a trusting relationship, a seller can take the edge off that fear and provide a more comfortable/secure environment for the consumer.   That translates into a higher number of customers being comfortable enough to lay down their cash.  (I am not stating that this relationship is justified in this context – just that it exists.  I always advocate honesty in such dealings, because while establishing a false trust might score you a few wins up front, long term it’s a failing proposition.)

So what does this mean from a pragmatic standpoint to the retailer?  It means retailers have to step up to the bat and really hammer home their product knowledge, and their ability to interview the customer and get a solid grasp of their needs.  Mating the absolute best product to the customer’s need, and being able to walk the customer through that process so they participate in the decision is really the key to the whole thing.  In a lot of ways, our product at PrismaStar was designed to facilitate this process, but unfortunately it was still not ready to be sold to a large audience.  Had I had another eighteen months of hard dev work with a good team of six to ten, I think we’d have been mass-market capable, but that’s just not how things went.

So on a technology basis, what does this mean?  A couple things:

  • Analytics:  retailers need good, reliable metrics to evaluate their results (A/B testing, customer reviews and interviews, etc.).  If they don’t have an analyst on staff already, they need to contract one independently or from a third party.  Without this, any changes made to their methods of selling will be little more than shooting in the dark and hoping to hit something.  Analytics also provides the ability to have predictable stock on hand, pricing needed to wipe out existing stock, and increase turnover counts.
  • Information:  absolutely top-notch, high-quality and pertinent product data in a language that their customer will understand and relate to, provided in several different formats (video, text, blog postings, customer reviews, images) to catch the various types of cognitive readers.  This information has to be VISIBLE and easily accessed – which includes making it easy to find info on the product the customer might come looking for.  At MidwayUSA, that company took pride in often knowing the details of the products better than the manufacturers of the products did.  That’s the kind of product knowledge needed.
  • Tools:  good selling tools.  This means the website, product search, the shopping cart, the payment system, delivery to the customer, they all have to be as free-flowing and seamless as possible.  Throwing bumps and slowdowns in the process (are you listening, MasterCard?) causes loss of sales.
  • Stores:  retailers are going to have to get used to the idea that having a physical store  might not be the best thing any more.  I’m not saying shut everything down, but take a long look at what they have in place.  Don’t be afraid to keep marginal stores open – breakeven sites have room to improve, and can provide intangible benefits such as name recognition and hands-on opportunities for your customers.  But failing stores, ones that consistently lose money, are obviously going to have to change.  That means coming up with new ways to cover their markets – maybe there’s a way to provide that customer segment with a kiosk instead of a full-on shop?  Maybe a store-on-wheels?
  • Shipping – evaluate how shipping is done.  Can the product successfully be drop-shipped to the consumer?  Most retailers have to provide two legs in the product’s journey – one from manufacturer to warehouse, one from warehouse to the storefront or the consumer.  Can that be reduced to just one – manufacturer to consumer?

And lastly, but probably most importantly:

  • An attitude assertion must be made to be helpful to the customer, no matter whether that customer ends up buying from you or not.  Do everything you can to help them find what they really need – even if it’s something you don’t carry and you end up having to direct them to someone else. 

Without this attitude, the retailer remains in the stance of viewing their customers as little more than a crop to be harvested.  Although such a view is useful and is very tempting in the abstract IT-dominated world of an eTailer, it negates the benefits gained in subtle ways.  The company culture must adopt a helpful attitude from top to bottom – or the depersonalized attitude will leak out, and the customers can smell that coming a mile away.

Okay, that’s enough of that for now.  I hope this helps someone out there – and even if it doesn’t, it was fun to write anyway ).

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