Online retail sales are forecast to more than double over the course of the coming years, reaching a projected total of 6.5 trillion U.S. dollars.
6.5 trillion is a big number, and an opportunity worth pursuing if you’re an existing or aspiring online retailer.
Since the early days of e-commerce, online retailing was defined by four pillars: Selection, Price, Experience and Convenience. The cost of entry was relatively minimal - if you had an assortment of products at good prices in a beautiful online store with free shipping, you could compete. But not anymore, those days are gone.
Over the past few years, particularly post-Covid, consumer expectations for online shopping have drastically changed. In 2021, a relevant selection must include personalized products and sustainable brands, and convenience means curbside pick up and Afterpay. While some of these “enhancements” are optional, most are crucial if you want to gain market share.
For most cash-constrained retailers, it is difficult to determine where to invest resources to stay competitive. The most common mistakes are made when retailers chase the market or their direct competitors. My advice: don’t do that.
Instead, start with your target customer and a few leading questions:
What are their priorities? Values?
What are their shopping habits?
What do they expect when shopping in your store?
Identify your direct and indirect competitors. Through the lens of a customer, evaluate their selection, pricing model, experience and conveniences. Do this often.
Use available data and relevant KPI’s to analyze your business and assess progress. Test repeatedly. Fund the things that work, and kill quickly those that don’t work.
The market is moving quickly, and increased expectations have led customers to switch brands. To mitigate your risk, you must aim to meet and exceed your customers needs.
Here the four pillars, and what I deem are non-negotiables if you want to compete and lead. Additionally, I have included some optional elements to leverage as you evolve your channel.
Remember to use your target customer as the filter for decsions.
“Customers spend 48% more when their shopping experience and product selection is personalized.”
2- PRICE / INCENTIVES
“84% of consumers say they’re more apt to stick with a brand that offers a loyalty program. And 66% of customers say the ability to earn rewards actually changes their spending behavior.”
“Video marketing isn’t an emerging trend anymore — it’s here.
Today, videos are a vital component of every ecommerce brand’s marketing strategy. And for good reason.”
“Animoto found that as many as 73% of customers are more inclined to purchase a product after watching an explainer video about it.”
THE AMAZON EFFECT:
“Not only will customers abandon a cart if the shipping costs are too high, they’ll also abandon a cart if the shipping takes too long. Even if the cost is free, shipping that takes longer than customers are willing to wait can be a deal breaker.”
SHIPPING / DELIVERY
Your Next Step:
Once you’ve checked the boxes, create a set of clear priorities and action items that are filtered through YOUR target customer. Identify the resources needed: capital, human, and technical. Develop a near term and long term road map, and adjust it often.
If we know anything, we know that nothing is certain. Be nimble and prudent.
Contact me for additional information at email@example.com
Lessons in Retail: Merchandise & Assortment Planning post- Pandemic: How to Anticipate the “New Normal”
It feels like we have turned a corner and are moving towards a post-Covid state by Summer. Mall traffic is up, and stores are busy for the first time in a year. Brands and retailers are reporting an uptick in apparel and footwear sales as consumers prepare to return to the office, take summer vacations, and make other post-vaccine plans.
But, is this just a “blip”? What does this new found optimism and spending mean for 2022 when we return to a “new normal”?
It means business still isn’t normal, and planning in this kind of environment isn’t normal either. Anticipating consumer demand across brands, classifications and channels is a massive challenge. But, with the right combination of data, performance history and instinct, it is possible to create realistic merchandise assortment plans. The key is knowing WHAT data points to use, and having the vision and experience to create and commit to the pla
Given the uncertainty in the market, I recommend a bottom-up approach to enable a higher level of visibility and more accurate financial projections for 2022.
To do that:
Where do you have big dips or peaks in sales?
Where can you plan for improvements? And by how much?
When you establish the monthly sales and inventory plans, you can plan the assortment.
The CLASSIFICATION MIX
Over the past 12 months, as a restful of the pandemic-induced lifestyle and WFH, consumers have significantly shifted their spending. While some of the changes will remain, other adjustments may be a symptom of the pandemic. The challenge for brands and retailers is anticipating how this will play out in the next 12 months.
To begin, I recommend starting at a high level:
What current trends will remain?
Then, using data for 2-3 years (PRIOR TO 2020 YE, and including 2021 YTD) analyze the following:
The analysis should result in a plan that reflects your vision of what you hope business will look like when the current crisis is more or less over, and we return to a “new normal” in 2022.
The BRAND MATRIX
Determining which brands to keep in your assortment lies at the intersection of customer demand and profitability - prior to 2020 and currently in 2021.
Rank the brands by GROSS MARGIN DOLLARS and you may be surprised to learn your highest revenue brand is not your most profitable, and may need to be reduced. Invest in the brands that meet or exceed customer demand, and reduce or temporarily eliminate the ones that do not.
We had a mantra at Nordstrom “sales are the truth”. If the customer did not vote for a brand or product with their hard earned dollars and buy it at regular price, we did not keep investing in it.
The KEY ITEMS
In my role as EVP of Women Apparel at Nordstrom, when I met with store managers, my first question was “What is your number one item?”. I would follow it with “How many units did you sell last month? Are you in stock?”. Every department had a top item, and the managers understood the importance of being in stock to maintain the rate of sale.
In every segment of the business, there are “must have items”. Whether you are a large or small retailer, identifying what those items are, editing them based on your CUSTOMER needs, and investing in them is a key component to a productive assortment.
When your budgets are finalized, and your assortment plans solidified, it is time to get visual.
To ensure we had focus in our assortments at Nordstrom, I instituted a monthly checkpoint titled “What Will You Stand For?”. The 12 functional departments I supported declared a “theme” and invested a portion of their inventory dollar to effectively present it in the store. This process was adopted by every other area in the company, and today guides the monthly product features throughout the merchandising organization.
Forecasting is a leap of faith, and 2022 may be the ultimate test. But, if you gather the correct data and focus on the things you can control, you can succeed during the most turbulent times. It requires instinct, vision and experience.
One of the most important lessons I learned over the years was to PLAY OFENSE, NOT DEFENSE. Decide what you are going to offer to the customer, and do it with conviction. Don’t try and be a jack of all trades as you will be the master to none.
If you need help getting this going, or if you are stuck midstream, call me. The clock is ticking and 2022 will be here before you know it.
In 2007, during the Global Economic Meltdown, as EVP of Women’s Apparel at Nordstrom, I led a $2B division through a strategic turnaround while sales dropped 25%. We maintained profitability while sales declined by commensurately reducing inventory and working with our vendor partners. I developed a consumer-centric merchandising strategy that was later adopted by the entire Nordstrom merchandising organization.
Turnarounds are when leadership matters most. Managers can stem losses with a few bold strokes, such as slashing inventory or consolidating jobs. But putting a retail organization on a positive path toward future success also requires leaders to adjust their behavior and leadership style.
Prior to 2020, many executives, operators and leaders in high-growth companies were focused on fostering innovation, driving revenue, and gaining market share. Today, many of those same leaders have had to shift their focus and make rapid decisions about things like reducing inventory, closing stores, consolidating headcount and managing expenses. They are facing time sensitive issues, and have to move to a more operational position which drastically alters the scope of their roles and priorities.
This is not an easy transition., Those in charge will be tested in ways where they have not developed their leadership skills, and the learning curve will be steep. They will need regular coaching from their bosses or outside advisors to succeed.
When I was a senior executive at Nordstrom navigating the 2008 economic meltdown, I searched far and wide for an expert to provide outside counsel and help me develop strategies for turning my $2B business around. What I found were either CEOs that were still working in the industry and unavailable to help, or consultants well-versed in academic answers without hands-on experience. I needed guidance from a leader that had “been through it” and had practical solutions for me. I found my coach in a non-executive board member who, to this day, I credit with much of my learning and leadership development. Gratefully, today I am that person.
For the past 9 years, I have worked alongside buyers, managers, CEOS and investors in all types of consumer goods. No matter what the segment of business, or whether it is thriving or failing, leadership is at the core. The quality and capabilities of the leader directly correlates with the level of success. And these four behaviors have been present in all the successful leaders I have worked with.
1: Practice Speed in Decision Making
2: Be Nimble and Adaptable
3: Measure Performance and Provide Recognition
4: Connect and Communicate
If you can model these behaviors, daily issues and crises are much easier to solve and the road to recovery is much smoother.
Behavior 1: Speed in Decision Making
The environment is changing by the day. Information may be incomplete, but it is important to process the available information quickly, align with your new priorities, and make decisions with conviction.
Determining how decisions will be made in this new environment, and by whom, will enable speed. Some decisions will need to be top down while others can and should be made within the organization.
Behavior 2: Adapt regularly without Flip-Flopping
In times of uncertainty, it is imperative that you decide what NOT to do. This could mean what classifications you will no longer buy, what marketing projects you will put on hold, or what regions / channels you may no longer pursue. Whatever they are, put large, costly initiatives on hold and save expenses until you solve the immediate issues of today.
Create an interim set of priorities and focus , and align organizational talent, performance metrics, capital and human resources accordingly.
But, if this new playbook is not yielding results, and new information becomes available, do not be afraid to course correct and adjust.
Being nimble is one of the most important behaviors leaders can possess during these times. I was occasionally accused of “flip flopping” when in reality I was constantly learning and adjusting to make progress.
Behavior 3: Adjust Performance Metrics and Celebrate Success
How you measured success in the past is probably irrelevant in the current state.
It is important you:
Behavior 4: Be Transparent and Available
In times of crisis, no job is more important than taking care of your team. In my experience, frequent, honest and positive communication is critical.
I held weekly meetings with my direct reports immediately following the executive meetings I attended with the Nordstrom family.
My purpose was twofold:
Sometimes these meetings were only 15 minutes but they were motivating.
Additionally, I made myself more available and reached out daily to check the “pulse” on the team. However you can, find ways to connect and support your employees.
Leading during a crisis will reveal a great deal about you and your organization. When the immediate problems are under control and you get to the other side, there will inevitably be another crisis to conquer. If you work on these behaviors you will be much better equipped to handle whatever comes your way.
The time is now!
Contact me directly to help you navigate your turnaround plans @ Lorettasoffe@live.com
Is it time to make the switch?
If you have a business, primarily reliant on the traditional wholesale or retail distribution model, you might be wondering if DTC is the right path for you. It’s a fair question, and one that deserves a clear understanding as there are obvious benefits, but also financial implications and barriers to entry including internal capabilities, online infrastructure, access to capital, and a highly competitive marketplace including AMAZON.
According to a recent IAB study, over two-thirds of consumers have come to expect direct access to a brand, and about 67% of customers have used a company’s social media for customer support.
For most businesses, the most obvious hurdles are organizational and operational deficiencies combined with competing in a very crowded market. In reality, the biggest challenge is the revenue and profit losses that occur when wholesale is decreased and DTC is being built. Brands that have relied on revenue from the wholesale partners to invest in the business are at a massive disadvantage when compared to the digitally native brands that use investor funds to develop and promote their DTC channel. The key is BALANCE. As you gradually turn off one channel, you continue to optimize and strengthen the other.
But, if you agree that the majority of commerce is done on the internet, and the best decisions are made with data, then this is the only option for growth.
The benefits of a DTC business are clear:
How to make the switch:
Before jumping to buy some turnkey software solution, you need to
1- Start with your CUSTOMER:
2- Study your direct and indirect COMPETITORS:
3- Evaluate your CAPABILITIES:
4- Understand the COST:
Go where your customer is … now.
My advice: don’t settle for what’s kind of working today. Challenge yourself to make BIG things happen tomorrow. Work within your financial and organizational constraints and do what you can afford to do NOW. You can layer on and spend more as business improves and resources become available. In this time of constant change, it is critical to make a move so you are better prepared to ride the wave in lieu of getting wiped out.
If you want to go where your customer is, you will quickly realize DTC is not an option but an imperative. Building a direct relationship with your customers and delivering the right product, at the right time, at the right price, will foster a better customer experience. With a better brand experience, your customers become loyalists and then evangelists, and will do a lot of the selling for you.
Move the Needle, Disruption, Unpack, Push Back, Low-hanging Fruit…..
Any of these sound familiar? Like you just heard them (or even used them) on your last ZOOM call? These cliches have become the “script” within the corporate world. And let’s not forget PIVOT … that was cliche before we were leaning in! But in the wave of the pandemic and the unprecedented number of struggling businesses, “pivot” deserves some unpacking.
Transitioning a core business or diversifying into adjacent categories or distribution channels is critical for survival. But for many companies, this shift into new customer segments, product categories, revenue models, pricing strategies, etc. is uncharted territory. To succeed, it requires the same surgical approach and consideration you would use launching a new brand. While time is of the essence, a delicate balance of speed and comprehension will yield the best result. You can be quick, but don’t be in a hurry!
Over the past few months, I’ve been working with owners and operators in hospitality, food & beverage, accessories, apparel, and design who are eager, and in some cases desperate, to pivot their business. I have found that regardless of industry, I consistently pose a series of questions (below) to proactively uncover inevitable issues or glaring opportunities.
Here is my list:
There is no way to anticipate all the items that may impact your goal. But one way is to keep asking yourself, “If this fails, why?” Be exhaustive with the list up front, it will serve you well and preserve your precious resources.
Last, develop a rigorous process for review and adjustment. If you cannot poke holes in your own strategy, surround yourself with people who can. At the end of the day, stay nimble, patient, and let’s circle back if you need more guidance!
4 Steps to Crafting a Powerful and Persuasive Mission Statement
“To offer designer eyewear at a revolutionary price.”
“To accelerate the world’s transition to sustainable energy.”
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
Can you guess these outstanding companies based on the openings of their mission statements? I am going to take the liberty to assume most of you answered “yes”. It is simply because mission statements like these (Warby Parker, Tesla, Starbucks) clearly summarize the company’s objectives, strategy, and values. In doing so, they create focus, both internally and externally, and leave little room for interpretation regarding what they do, how they do, and why.
Having a well-crafted mission statement is invaluable to the success of your business for many reasons.
Click here to read more about why a mission statement is so important.
So how do you Develop Your Mission Statement? Follow these 4 Steps….
#1 DEFINE YOUR PURPOSE
Ask yourself why does your company exist? For whom, and how do you deliver your product or service? What differentiates you? If you’re an E-Designer who offers virtual design services, be specific on WHO your services are for, what problem(s) they are trying to solve, and what makes you unique in your service offering. Together, these elements combine to distinguish your value proposition.
An excellent example of this is Linkedin whose purpose is “To connect the world’s professionals to make them more productive and successful”. It is crystal clear what they do, who they do it for, and why.
#2 BE SPECIFIC AND ACCURATE
Avoid using industry buzzwords and jargon, and use the old elevator speech guideline as if you were describing your business to a person in an average elevator ride.
Choose your words wisely, and make it easy to remember and a reflection of what you ACTUALLY do (or intend to do). It is critical that your employees and customers can understand and repeat your mission statement.
Consider Google’s mission statement which could not be more specific and accurate “To organize the world's information and make it universally accessible and useful.” The lesson here is don’t overthink it, just clearly articulate exactly what you do and why you do it.
#3 BE RELEVANT AND INSPIRATIONAL
While it’s important to make your mission plausible and attainable, it can also be powerful to include an inspirational element. This element can encourage your team members to not only work towards the mission, but take tremendous pride in both their role and the company.
Chipotle, for example, aspires to “Cultivate a better world”. While its mission might begin without directly referencing the food it makes, it quickly becomes aspirational. The company links its core service (making food) with its broader values (connecting how food is raised, prepared and tastes).
#4 KEEP IN SUCCINCT
My best advice is to go back to the elevator speech and keep your mission statement short and sweet. If it’s am accurate description of what you do, and you are 100% focused, by nature it will be succinct.
I can’t find a better example than TED whose mission is to “Spread ideas”. Less is always more.
Once you’ve written a mission statement illustrative of your business, your job is only half-finished. You must communicate with your team and strive to gain alignment across every activity within your organization.
As a leader, you need to “carry the flag” and remember everything you do can ultimately reflect the values, purpose and passion behind your company's mission statement.
A well crafted, relevant and specific mission statement can serve as a daily reminder of your business, what you’re striving to do, and why you're doing it. It can guide you for years to come. And like a finely tuned machine, don’t underestimate the small changes will improve it and make it exactly right.
For additional steps on Building a Powerful Brand, check out my recent article ~ 5 Steps to Beating your Competitors and Taking Market Share https://www.lorettasoffeconsulting.com/blog/archives/03-2020. I suggest that you examine every aspect of your brand position and participation strategy not just once when launching or repositioning your brand, but often.
Too many stores. Too many Malls. Too much space allocated to what we are now deeming non-essentials. Too much inventory. Too many “White Flower Day” sales. Too few salespeople. Too few knowledgeable salespeople. Too few conveniences. And a completely changed consumer.... the list goes on and on… and retailers one by one are falling victim.
There has never been a more precarious time for retailers, especially those that were complacent about their future. With stores having been closed for nearly two months, inventories continue to pile up and future orders are either coming into closed stores, getting pushed out to future dates, or being canceled altogether.
Re-opening dates are undecided in most states, and even with a staggered return to business, customers’ response is uncertain. Many factors will impact consumer spending including how quickly people get back to work, additional government stimulus initiatives, and precautionary measures that retailers put in place to ensure safe shopping environments.
The grim reality is that while most retailers are trying to balance short-term survival with long term viability, many won’t make it. Lauren Bitar, head of retail consulting at RetailNext said recently, “I think we were overdue for another shakeout, both with the large number of direct-to-consumer brands which have started to open stores and for legacy brands which have too many. And as always, from the ashes, new brands and store concepts will rise up.”
The issues that have plagued retailers for over a decade are not new, but now, as a result of COVID-19, they have become emergencies. How each problem is prioritized and resolved will determine who weathers this final battle, turns these challenges into opportunities, or simply dies a natural death.
I have broken down the five fundamental issues facing retailers today and attempted to provide some guidance on how to navigate in the short-term and long-term.
#1: THE CHANGED CONSUMER
Whether you’re targeting financially flush baby boomers or Next-Gen shoppers, there are significant changes in the consumers’ mindsets, priorities, and shopping behaviors as a result of COVID-19. Regardless of generation, people are coping with their “new normal,” and their purchase behavior reflects this.
Stay at home orders and more people working from home means different product priorities. Health and wellness, beauty, home, and accessories are proving to be winners, and this doesn’t look to change anytime soon.
Comfort is key and even more important than ever across multiple categories with an added emphasis on health, wellness, and activity.
Value is critical. As seen with other economic drops in spending, during and after economic recovery, consumers become very value-conscious especially with fashion goods (apparel, accessories, shoes).
Brands are less important. As private brands at Target, Costco, and Amazon soar, shoppers are demonstrating that even brand names are less critical when making a purchase.
MITIGATION STRATEGY - Know What Matters Most to Your Customers
If you remember one thing, it should be that all solutions need to be grounded in what matters most to customers.
Adjust your future penetration by category to reflect the change in consumer demand. Your sales & inventory plans, brand budgets, space allocation, and marketing/advertising budgets need to be adjusted.
Consider incorporating comfort across categories and price points as this preference probably won't change anytime soon.
Review your AUR (average unit retail), percentage of sales at regular price vs.off-price to determine the “sweet spot” pricing for future orders. For many retailers, sales during the pandemic have been between 25% to 40% off regular-priced retail, and these lower prices are stimulating purchases. Look at your current markdown plans and prices and adjust them accordingly to make them count.
Future product assortment decisions should be based on the category, product, value, and price first, and brand second. If the first 4 values are in place, the customer won't care what the brand name is. If you have a private label division or brand, now is the time to prop it up.
#2: INVENTORY OVERLOAD
Historically the problem of having too much inventory stemmed from two main issues:
Enter a global pandemic with store closures for over two months and this problem is now a crisis. Retailers have a huge amount of merchandise in stores that they can’t sell and it is only becoming more out of season the longer that store closures drag on. Because it is unclear just how much consumer demand there will be the rest of the year, retailers are also trying to figure out what’s in the pipeline for the rest of the year that they can still cancel, so they don’t risk being left with too much inventory in the fall and beyond.
What this means is that on any given day a retailer could have up to five seasons of product in their stores and no customers (residual sale merchandise from Fall ‘19, Holiday markdowns, Resort markdowns, Spring, and even some early Summer merchandIse which historically delivers in May, etc).
Reducing overall inventory levels is the highest priority, but no matter what your liquidation strategies are, it is critical to balance the options with your brand equity and consumer perceptions.
MITIGATION STRATEGY - Short Term
Reduce future incoming inventory by partnering with vendors or manufacturers to cancel orders or push out deliveries until fall. Consider repricing your product to reduce the overall value and make it more attractive to customers.
Identify the most perishable merchandise, and prioritize seasonal categories. Evaluate ownership and viability as the product is losing value. Take deep markdowns (40-60%) to cut through all the promotional activity and remember your first markdown is your least expensive.
Leverage online stores and off-price retailers like Burlington, TJX, Ross, or Nordstrom Rack. Consider donating inventory in certain relevant categories and practice doing good while managing your business.
If possible, write-off fabric commitments intended for future production in lieu of manufacturing which could be cheaper than the inevitable markdown.
Pack and hold should be a last resort. Most merchandise is unlike fine wine, it does not get better with age!
MITIGATION STRATEGY - Longer Term
Use your financial planning process to force inventory reductions.
At the risk of oversimplifying, I would recommend taking a blunt instrument to your average inventory levels and reducing across the board by a minimum of 20% or greater and commensurate with the planned decrease in sales. This planned inventory reduction will force the editing process, and eventually produce increases in regular price sell-through and profitability.
#3: GO ONLINE OR GO HOME
Prior to COVID-19, omnichannel retailing was the only way to survive, let alone grow. Many traditional retailers were struggling to catch up to their digital-native counterparts or DTC brands. And the DTC brands seemed to be racing to find brick and mortar stores so they could bring their brands and products TO the customer in a physical space.
The race to omnichannel proficiently was in large part driven by the value of omnichannel consumers. An IDC Retail Insights report revealed that multi-channel consumers spend more money, including:
Optimize online and offline was a formidable challenge then and now it’s a necessity.
For the past few months, customers who were forced to pivot to online shopping are now savvy and comfortable across multiple categories and therefore more apt to maintain that switch.
“In China, the share of consumers over the age of 45 using e-commerce increased by 27 percent from January to February 2020, according to Chinese market-research firm QuestMobile. Once they are acclimated to new digital or remote models, we expect some consumers to switch permanently or increase their usage, accelerating behavior shifts that were already underway before the crisis.” -McKinsey
MITIGATION STRATEGY - Go Where Your Customers Are
(which is primarily online for the foreseeable future)
Now is the time to prioritize a well-integrated multi-channel operation. If possible, continue to invest in the online experience, and make it engaging, easy, affordable, and quick. The only replacement for the instant gratification you get in a store, is the click and collect, or click and receive right away!
Remove any friction with the process, particularly at checkout in order to reduce your cart abandonment rate.
In today's market, free shipping is bare minimum - with purchases and returns. You should also be over-communicating with consumers before, during, and after transactions and extending your return policy to accommodate for the slower shipping times we’re experiencing.
Nathan Richter, vice president of strategy and Insights at Dynamic Yield, said recently “Free shipping is absolutely a consumer expectation, and with the delivery time frames noted, we are seeing better consumer planning happening within their buying cycles, allowing for the swap from delivery “as fast as possible” to “on time and free.”
There is an opportunity to regain some market share but it will require a concerted customer-centric analysis and investment in the experience, convenience, assortment, and pricing strategies across all of your channels, especially online.
#4: THE GRIM FUTURE OF SHOPPING MALLS
Malls were among the most hard hit by the retail apocalypse of the past decade and now are at massive risk as a result of the global pandemic.
According to real estate research firm Green Street Advisors “50% of mall department stores could close by the end of 2021” and “if department stores start closing up shop, it could doom the malls they vacate as well”. With department stores in malls gone, other specialty retailers will undoubtedly question their existence if they aren’t already on the brink of closing themselves.
MITIGATION STRATEGY - Get Creative & Make The Best of Your Locale
Renegotiate your location within the mall. Just as in retail stores, there are ‘A’ locations, and ‘C’ locations. Go where the foot traffic is, and seek adjacencies that can bring your target customer in-store, and enable cross-selling.
Renegotiate your lease or your payment terms with the landlord. The mall owners are going to be faced with tremendous vacancies and if you can stay, your negotiating power just got bigger.
If you can vacate your mall locations, look towards more localized centers.
Most customers want convenience and efficiency and want to be able to shop close to their home or along their driving route or when they’re traveling.
Prior to COVID-19, Sephora has committed to opening 100 new stores in local neighborhoods with smaller formats as a growth alternative to their position in major malls.
#5: BIGGER ISN’T BETTER
Retail stores have been built way too big... as was just about everything in the ’80s. Fresh Prince of Bel-Air ring a bell? Just last year retail space grew 3.7% while the general population of the United States grew less than 1%.
Now with a complete retraction of retail sales, plummeting 8.7% in March which was the biggest decline since 1992, is yet another massive dilemma for department stores. Actually, the supersize stores may be a short term benefit given the mounds of excess inventory at the moment.
But, long term, this is going to be the final nail in the coffin.
Prior to COVID, consumers were looking towards smaller, local stores that offer a more targeted product assortment and a more engaging shopping experience.
MITIGATION STRATEGY - Shrink Your Box
Less is more. A small space and other constraints can force editing and editing will be key in solving many of the problems outlined in this article.
Ways to shrink the box:
If you can, negotiate for a new location in your current commercial retail space so that you can make necessary edits and updates while social distancing restrictions are still in place. This way, you’ll be ready for customers when they are allowed to shop in malls again.
If you can’t shrink your storefront, get creative with a remodel. Close up entire sections of the store (an entire floor, back corners, etc) to keep the focus small.
When looking for a new brick and mortar location, prioritize smaller, boutique-style shops with a neighborhood feel.
COVID-19 is an opportunity for brands to reconfigure their strategies and storefronts. Get creative with new ways to serve your customers, edit your offerings, and really hone in on the things that will make you stand out from the competition.
Reach out today if you need additional help navigating the wake of this global pandemic.
Everyone is baffled by toilet paper hoarding, and no one is surprised we are all drinking more. In our house, toilet paper back-stock has remained constant (but minimal) before and through the pandemic. Our tequila assortment, however, has never been greater. Clearly we’ve allocated resources by prioritizing entertainment over essentials.
It’s the same in business. In your business, especially during a downtime, resource review and re-allocation is critical. But, like a plan to exercise daily, this analysis can easily get pushed off your priority list by any number of issues that seem more urgent.
When you’re allocating money, time, and management attention, think about where they will deliver the most value to your company. According to McKinsey research, 83% of senior executives identify resource allocation as the top management lever for spurring growth—more important than operational excellence or M&A.
So where do you start? It’s like a good margarita — start with the Tequila.
And that means start with your customer.
Your customer will always serve as the best filter for decision making. What to invest in and what to spend time on should be devoted to improving the customer experience. If your customer is happy, your business will undoubtedly be better. And everyone within your organization needs to believe it.
The ultimate success of any business pursuit is contingent upon internal alignment. Your team, big or small, needs to completely understand the mission and vision of the company, the intended outcome of a particular investment, and their role. They need to drink the Koolaid. They need to be ambassadors.
Your available tools are as critical to your business as they are in making your favorite margarita.
The most valuable part of your company is people — the human capital — and any plans to move your business forward have to start with them. With so much change and churn in the world, people are the only real differentiators in any business. They possess a skill set, knowledge, expertise, and experience that can't be easily replaced. When you recognize individual performance and foster a culture of innovation and contribution, you can maximize this resource and realize your goals.
At some point, you’ve got to spend money to make money. Whether you’re investing in technology, tasks, products, or people, spending money is smart as long as you have a clear set of priorities and a detailed roadmap.
Time is your greatest personal asset, but it's what you chose to do with it that will define what you achieve. You have to plan how you spend your time, ensuring that it is on the things that will improve your business, both in the short term and long term. You can never get time back so make sure to spend it wisely.
Ok, now that you’ve committed to the challenge of resource allocation and review, here are some pro tips to guide you through the process.
5 Important Guidelines for Resource Allocation and Review
1. What are we drinking tonight?
Think about what will create the most value for your company vs. the resources required to get it done.
2. Follow the cocktail recipe — data matters.
Any resource-allocation exercise must be grounded in hard data so that decisions are driven by facts and logic and not personal biases.
3. A shot, not a double — think micro not macro.
You need to drill down to the smallest meaningful items, where a shift in resources will produce a material impact for the overall company. The devil is in the details.
4. You don’t always need a mixer.
Once identified, don’t dilute the highest value items. Force the prioritization of opportunities based on their value creation and stick with them, up and down your organization.
5. Another round — you can't just stop at one.
In this volatile business environment, resource allocation should be reviewed regularly and adjusted accordingly. Agree to a minimum amount to be reviewed and reallocated annually but be careful of knee-jerking and causing unnecessary disruption.
5 Issues that Can Disrupt Your Plan
The biggest proactive move you can make in your business is to know your blind spots. Successfully navigating your land mines requires you to be aware, nimble, and agile.
The 5 biggest potential disruptions that could affect your resource allocation (aside from a pandemic) are:
Keep an eye out for these challenges, make sure plans are in place to accommodate them, and remain agile in your business strategy.
Some Final Thoughts
Because of the pandemic, your greatest asset — time — is also your cheapest commodity. As business owners, we should be using this extra time wisely and effectively, and doing the things we always said we’d do, “if we had the time.”
Resource allocation and review is one of those critically wise exercises.
And to come back to our house’s Tequila-over-toilet paper choice, we’ve always had a huge back stock in paper towels for when things get real. I mean, we’re not unhygienic barbarians — we just want a good margarita.
If you want help crafting your unique cocktail of resources, reach out today.
The world may be “closed” for the majority of retail and food service, but that doesn’t mean you can't find ways to engage with consumers and generate some business.
For the past month, whether in my in-box or on my walks, I’m seeing creative solutions being put into work by some agile and tenacious business operators and owners. Drawing on my own experiences (having survived the 2008 recession) and tactics, combined with what I am seeing, I've compiled a list of five action items you can put into play today.
1: Work IN your business - Be Creative, Be Visible
I routinely counsel CEOs and entrepreneurs to spend more time working ON their business versus their natural inclination which is to work IN the business. I urge them to spend more time developing their long term business plan vs. managing the day to day execution.
But, desperate times call for desperate measures, and now the is time to spend the majority of your time IN your business, adjusting your near term strategy and your execution plan. You’ve built your business, and now you need to pivot it. And quickly.
If your restaurant or store is open at all, as the owner or operator, you need to be in the front of the house - figuratively or actually. Your loyal consumer wants to see the executive role up his / her sleeves, come out of the boardroom, and lead.
Customers trust a business more when they can attach a face with the business so make sure you’re humanizing your brand and enabling customers to see the Who behind the What.
2: Be Customer Centric - Do You Know What Your Customers are Doing?
Go beyond what your customers are wearing and think about what they are doing 24/7 — drinking, cooking, setting a dinner table, playing games, listening to music, exercising, etc. and be a part of it.
Your customers depend on you for all types of information and products. They were patrons of your brand because there was something about you they trusted and resonated with. Use this relationship to surprise and delight them with unexpected products, services, and ideas.
If you’re a restaurant or bar, share your playlists and recipes via social media.
If you run a home furnishings store, create shoppable tablescapes by theme, color, or print. And then deliver them.
If you have a gift store, share the rules of some heritage card games like hearts, spades or spoons, and then design and sell COVID -19 card sets.
Use the customer as your filter for ideas and decision making and you won’t go wrong!
3: Mashups - Unexpected Collaborations
Now more than ever, we need to help one another both personally and professionally. Successful partnerships can bring together two talents that are stronger together than they are individually. Imagine ways you can enhance the customer experience with your brand while collaborating with another.
MasterClass™ offers courses across multiple categories including in culinary arts, photography, gardening, and beauty. In any of these categories, there is an opportunity for a MasterClass ™ to partner with retailers.
I am taking The Mixology class on MasterClass. I would love it if there was a partnership with a local liquor store where I could click to purchase the items featured in a particular recipe and get them delivered. This would allow me to practice my new skills, saves me an errand (if I am able to leave my house), and drives revenue for another retailer.
An important key to the return of business will be leveraging one another’s strengths and core competencies to deliver a better customer experience.
4: Use Your Storefront for Good
People are out walking more than ever, and if you have a physical store or space, customers are passing your location multiple times a week. Use your windows, doors, and walls to convey a personal message, engage with people, and brighten their day.
Harrods, London joined the worldwide movement of filling empty streets with colorful, uplifting imagery with its rainbow windows in their Flagship store that read "sunnier days ahead" and "thank you to all the extraordinary key workers."
Another opportunity is to participate in things like the Teddy Bears Scavenger Hunt rolling nationwide. Some businesses participated in a virtual or distanced egg hunt on Easter.
How could you celebrate Mother’s Day or Memorial Day in the coming weeks?
Don’t underestimate the power of messaging at a time like this.
5: Social Media
I’m not an expert on this, nor is anyone during this unprecedented time, but I do think some sage advice when it comes to social media is to think about what YOU want to engage in. Be creative, relevant, and honest. Your goal should be to bring customers into your world, behind the curtain.
Think about adding value and not about driving sales or traffic - the revenue will follow if you do the first thing correctly. The last thing a customer wants is an irrelevant email featuring spring clothes and dressy shoes they are never going to wear. DO NOT go back to your old ad schedule.
This is a great post with some solid guidelines and tips for handling social media right now.
How you lead, imagine a new retail landscape, and respond to today’s challenges will shape how your customers perceive your brand and their loyalty to you.
This is an opportunity to flip the market on its head and try something new!
If you want help developing creative solutions for your brand, reach out today.
What does your brand stand for?
Who is your target customer?
What are your key differentiators?
WHY does your brand exist?
Prior to 2020, most brands had difficulty answering these basic questions, and consequently lost traction with their consumers, not to mention sales and profits. They could not clearly articulate their target customer, had a diluted brand message, and many developed mediocre products that did not match customer demand. Additionally, the brands competed in an over-crowded market with excessive duplication across all categories and segments. For many, this scenario was a recipe for disaster.
Fast forward a few months and COVID-19 has changed everything.
At least for now.
With so many people suffering and dying every day, it feels equal parts meaningless and scary to think about returning to normal again. Nevertheless, at some point, we will return to some sense of normal. When we do, customers’ mindsets, shopping behaviors, and priorities will be significantly different.
Customers will expect “trusted transparency” from brands. They will want to understand the human side, the philanthropic side, and sustainability will take on an entirely new meaning. There will be a reshuffling in the marketplace as customers will vote with their dollars. Only the strongest and most nimble brands will survive.
This is the time to transform CHALLENGES into OPPORTUNITIES and examine every aspect of your brand position and participation strategy. After you’ve reduced operational costs and navigated the Government websites, you need to shift focus into re-starting and re-opening. What will you do differently? What disciplines and cost-cutting measures will you maintain? What will be your PROMISE to the customer, and how will you WIN?
It is time to STOP playing defense and START start playing offense.
So how do you do that? The short answer: You need to start with the customer. But it does not stop there. In fact, the success of any brand depends upon following a very deliberate process requiring a laser-like clarity on your brand’s mission and vision, your competitive positioning and key differentiators, and your communication strategy. It is an iterative process you need to repeat over and over again, as long as you are in business. As Lou Holtz once warned, “You are either moving forward or losing ground.”
I developed this 5 Step Consumer-Centric Brand Clarity Process while I was resuscitating a $2B Women’s Fashion Division for Nordstrom in 2009 post-recession. While we barely survived the recession, we emerged in a condition that required an entirely different mindset and strategy for our business.
In order to be more productive and meaningful to our customers, we positioned each of the 12 functional departments as an independent brand with a clear mission and vision. Each department had a clearly defined target customer with a certain lifestyle and life stage, and distinct product priorities, needs, and wants.
We developed a product assortment strategy based on the target customer and consequently eliminated overlap and duplication in our inventory. With the customer as the filter for our decision making, we reduced our inventory by an average of 22% and increased revenues by approximately 18%.
While this took time to implement, we succeeded because we followed each of the following five steps to deliver an edited product assortment and drive breakthrough results.
Now it’s your turn!
Step 1: Clarify Your Mission & Vision for the Brand
In any endeavor, clarity is key.
Being crystal clear on your brand’s mission and vision is the first step to differentiating yourself and outshining the competition.
What’s the difference between a brand mission and a brand vision?
Brand Mission: A mission for your brand answers the following questions:
To make it plain and simple: your mission is what you do today. One thing I often ask my clients is, “if you were to gather people in a room, what would they say about your brand? What is it you do best, from their perspective?” This feedback can help you determine your Brand Mission.
Having a clear mission statement - and aligning with it - is critical for success.
Brand Vision: A brand vision answers the question of ‘Where do you want to go and how will you get there?’
This helps you figure out “What Will You Be Famous For?” Which is your North Star. To figure this out, consider what success will look like for you specifically. What would your success be based on? What did you set out to do that made you stand out, shine, and succeed?
When your organization understands and supports WHAT you are focused on today (your mission) and WHERE you are “going” (your vision for the future), you create alignment, a clear set of priorities, and a much greater chance of success.
Now, WHO are you doing it for?
Step 2: Identify & Clearly Understand Your Target Customer
Whether you have a new product launch, or a much-needed brand refresh, the only way to make the right decisions regarding product design, category expansion, price, fit, etc. is to align your choices with your target customer.
In order to do that, you must first identify and intimately understand who it is you are trying to capture, engage, and sell to. While you can sell to and serve all people, the trajectory of your decision making needs to be angled toward your target customer. Remember, if you try and be all things to everyone, you will be nothing to no one.
When you are learning about your customer, it is critical to balance qualitative and quantitative findings to thoroughly understand him/her. Both tell us about customer behavior, but each gives a different perspective and level of detail.
Hard data is more precise as it is measured – “How many customers are selecting X?” Soft data gives us a lot more detail and context behind the customer behavior and values.
This is psychographic and behavioral information that cannot be measured and is subjective.
I am a big believer in starting with qualitative data, and getting in front of customers to better understand their lifestyle, life-stage, product priorities, preferences, and behaviors. You will learn where, when, and how your customer shops, and which brands they prefer across all categories in their life, from food and beverage to hospitality and clothing. You will learn what car they drive, what hotels they choose, and what bottled water they drink - - and why?
You can use these insights and many more to form hypotheses around the products or services to deliver the most value to this group. When you’ve completed this step, you can begin to gather and interpret hard data to validate these hypotheses and develop your strategy.
This is the information you have access to every day in some form. In the simplest terms, it tells you what happened in your business, when, and where. You can summarize this information and quickly make decisions. But, in order to be fully customer-centric, you need to balance this with what your customers say and do (qualitative data).
I recommend you start with a list of questions to be answered or hypotheses to be validated. From there, you can either mine existing data or conduct a brief, focused survey with an adequate sample size of participants.
Next, use this depth of information to navigate the competition and sharpen your differentiating factors.
Step 3: The Competitive Landscape & Your Differentiators
In any business, it’s important to understand where your brand exists relative to your competitors - in the grid of your segment’s priorities.
To do this, you first need to have an understanding of how your category is segmented. Is it by functionality and price? Or by sustainability and style? Or by some other metric?
From there, your brand needs to understand where you exist relative to direct and indirect competitors.
Each market segment has its own priorities and the image below shows an example of a common pairing - price and functionality.
With these data points, you can answer questions like:
Depending on the results of this process, you may need to make some adjustments to your product offering, market positioning (price/value/distribution channels) or both.
The more information you have here, the more clarity you can gain, the better you’ll be able to determine how you will WIN with your customer and differentiate yourself from the competition.
Step 4: Communication Strategy
When you have a clear articulation of your brand’s mission and vision, a thorough understanding of your target customer, and determined differentiators, you can develop a targeted communication plan. Your plan needs to be creative and innovative, but more importantly, it needs to underpin the key pillars of your business to drive clarity and loyalty with your target customer.
You need to follow the “5 W’s and an H” strategy…
While it may seem simple, developing an authentic and relevant brand voice and tone is critical. Prioritize building a community, enhancing engagement, and growing relationships with your customers. Do this by being authentic, honest, and open to dialogue - both good and bad. Your goal is to develop a community of brand enthusiasts who are loyal and willing to share on your behalf.
If your value proposition is clear with your customers, you will gain their “mind share” - they will think of you first. When you have their “mind share,” you will undoubtedly win their market share.
Step 5: Make a Detailed Path Forward
This is where the rubber meets the road.
Now that you’ve invested the resources to get crystal clear on your brand’s mission, vision, target customer, differentiating factor(s), and communication strategy, it’s time to create a list of priorities and a timeline.
You need to create 30/60/90/180-day plans to identify the business priorities and tasks, enablers, goals, and metrics to ensure you stay on track with the strategic initiatives you have decided upon. It’s super important to identify who in the organization is the sponsor, leader, and executor of each task. This details who is accountable for which results and activities, and who will manage the process.
None of the work in Steps 1-4 matters if you don’t create a detailed plan and stick to it. In my experience, this is where it all falls apart - businesses don’t create or follow-through on an execution strategy. Discipline and accountability are the ultimate keys to success.
While most days feel like groundhog day, the clock is ticking. There is an opportunity to come out of this global disruption in a stronger, leaner position. Use the time you have now to get prepared and figure out how you’re going to do things differently — and then actually do it.
To pivot your business and emerge on top, book a consultation with me today.