Reinventing Retail

Just like physicists are fond of saying matter is neither created nor destroyed it simply changes form, so goes retailing.  The industry has morphed from small independent stores, to chains, to big-box, to online, to mobile.  Consumers' tastes, habits, and preferences change over time, thus retailers must always stay in-tune.  Unfortunately, many don't.

The most recent whipping-boy of the industry seems to be Brian Dunn, the CEO of Best Buy, who's company was attacked in a recent Forbes article.  (A follow-up to that article, which includes an indirect rebuttal from Brian Dunn, is here.)  While not calling out Best Buy by name, Marc Andreessen also predicted Best Buy's forthcoming demise.  I just finished watching the show Best Buy: The Big Box Fights Back on CNBC, and was struck by the pessimistic future painted there as well.  But in my experience, Best Buy is one of the most innovative retailers in the industry.  Unfortunately, I think their problems are more a reflection of the products they sell rather than a lack of willingness to change.

So are all retailers in trouble?  Ron Johnson, who is credited with Apple Stores' success, recently said retail isn't broken, store are.  Now he needs to prove it as CEO of department store chain JCPenney.  His recently announced transformation plan includes "fair and square" pricing, but Apple was able to avoid discounting because of a lack of viable competition.  JCP doesn't have such an advantage, so it remains to be seen if that strategy will work.

Barnes & Noble did a nice job moving into digital books, unlike competitor Borders, but B&N is still in a fight for its life.  Now they are considering spinning the Nook business off.  While that might unlock additional value in the Nook business, any decoupling from B&N makes their stores less relevant, a step in the wrong direction.

And while physical stores are doing more to be connected to consumers online, there's a rumor that Amazon might just open its first physical store in Seattle, ironically in a former Borders location.

I hate to use this overused phrased, but I will... retail is at an inflection point.  Chains need to lighten the burdensome cost of physical stores, find a way to offer more value to in-store shoppers, or preferably do both.  It starts by building Your Experience Platform to support a strategy for empowering employees to delight your customers.  That includes making better product, placement, pricing, and promotion decisions on the backend, and delivering a unique shopping experience across all selling channels.


We're running fast toward the future of shopping, but only those willing to change will finish the race.

Comments:

David,

I would love to continue talking on this subject with you. I think it is an important discussion that can help Oracle and all its customers succeed.

You said: "But in my experience, Best Buy is one of the most innovative retailers in the industry. Unfortunately, I think their problems are more a reflection of the products they sell rather than a lack of willingness to change."

I disagree. Electronics is a tough market, but I don't think that is why Best Buy is struggling.

I have been studying Jim Collins books GREAT BY CHOICE and HOW THE MIGHTY FALL and see a lot that parallels the points made by Larry Downes of Forbes. Great companies are not marked by a "willingness to change"; in many cases, they have less innovation and change in the face of a disruptive market than their competitors. The difference is the vision and discipline to execute on that vision, where everything from the tiles to the tech supports that mission.

Finally, inventory control is a core competency for retailers. Innovation is wasted when you break trust with a huge number of your customers. We used to say that a disgruntled customer would tell 7 to 12 other people about a bad shopping experience. When the number of disgruntled customers is 30K, the Minneapolis Star Tribune, New York Times, Wall Street Journal, and Forbes tell millions about it. One wonders if innovation distracted from more important needs.

M

Posted by Marc L Windahl on February 06, 2012 at 01:34 PM CST #

Great points, Marc. I'll have to look for those two books.

Posted by David Dorf on February 06, 2012 at 03:05 PM CST #

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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