Retail – not ruined, just reinventing
If we’re to believe the headlines, retail is headed for ruin. Every month there’s another Darrel Lea going under. Every other week someone from DJs or Myer is talking up how it’s the “toughest conditions in 25 years”. And this month, Gerry Harvey raised the white flag when he declared Harvey Norman was getting out of technology products after announcing “the worst result we’ve ever posted”.
But behind the bad news headlines are a number of more telling Truths.
Truth #1: Big Retail Needs Rethinking
Fact is, the dominant retail model of the past 15 years is now hopelessly out of tune. Since Roger Corbett rode Project Refresh more than a decade ago to generate double-digit year-on-year growth for Woolworths, Big Retail in this country turned its focus to the back office.
Australian retailers have spent millions of dollars on world’s best practice systems in warehousing and logistics. Executive bonuses have become geared around finding more efficient means of getting product to the store, on the shelves and in front of the consumer.
This is Big Retail – retail at its simplest and most efficient: build a shop, stock it efficiently and make a little money on big volumes driving out the door. “Stack ‘em high and watch ‘em fly!”
And it worked. It worked for Gerry Harvey for 15 years. It worked well enough for Myer to be bought and sold. It worked for Bunnings and it worked for all those other Big Retail brands we’ve come to know and appreciate.
But what worked then won’t work now. Then we were living in the era of “purchase promiscuity” – when consumers created their own demand through unprecedented levels of personal debt.
But now, the customer has changed. Debt’s become a dirty word and Australians are saving more than ever.
The Big Retail model does not work without Big Debt driving demand. Which leads us to the second harsh reality.
Truth #2: Retailers Have Forgotten How To Retail
When I was growing up in retail, we used to talk about retail as an entertainment business. Shopping centres borrowed from Performance Studies theories to create an “experience” for the shopper. We’d talk about creating shops people would be prepared to pay an entry fee to shop in.
But for 15 years, retailers have not built shops. They’ve built stores. Places that efficiently house lots of stock, delivered with efficiency and best practice logistics.
Stores are designed by technicians, who figure out the most efficient way to get people in the door, through the store and in front of the stock the retailer most wants to sell – then through the point of sale and out, to make room for more shoppers.
But that’s not shopping any more than takeout is dining. That’s consuming.
The truth is that Big Retailers have forgotten their job is not to be Store Managers, but to be Shopkeepers. Store Managers know how to store things. Shopkeepers understand shoppers.
Shoppers demand more respect than they’ve been getting. They expect their custom to be earned – if they’re not given a good reason to go out to shop, they’ll just shop from home. And for Big Blunt Retail, with thousands of efficient stores and a workforce of Store Managers, that’s a big problem.
Truth #3: It’s Not The Internet, Stupid
Big Retail got itself into this mess because it turned its back on the front of house and instead decided its money was made at the back dock.
As a result, it lost touch with its customer, and lost the skills of listening to and serving the needs of its shoppers.
Which is why Big Retail spent the past three years blaming the internet for its poor performance.
The industry would be ruined, we were told, unless the Government fixed the 10% GST disadvantage retailers face against online competitors. That’s typical of an industry that now sees its role in managing percentages in the supply chain, rather than managing its relationship with its shoppers.
And wrong. The customer called “liar” loud and clear – that there’s far, far more than 10% difference in the price of goods bought on the internet versus the prices in Australian stores. And a far, far better service experience shopping with even the most basic of e-tailers than with the biggest, bluntest bricks-and-mortar department stores.
The fact is shoppers don’t distinguish between buying in a store and buying online. They’re just shopping, and they’ll shop where the experience best meets their expectations.
And the fact is shopping online has become just a far better experience than shopping in stores. It’s intuitive. It’s connected. It’s real time. Help is right there when it’s needed.
How many Big Blunt retail stores can say all of that?
So is it too late for retail to save itself, or can it learn from its mistakes?
The bottom line is: the shopper drives the bottom line. Big Retail in this country unlearned that fact in the past 15 years, and needs to catch up fast.
Small retail stayed smart. The average franchisee, for example, never had the luxury of forgetting how to run a shop and how to look after his or her shoppers.
Nor could they afford not to invest in their brand – their franchise. Big Retail saw advertising as something it could put through procurement and make more and more efficient.
So Big Retail is pausing to reinvent itself. The greens shoots of a new era can be seen in the new campaigns for Woolworths, Bunnings and Coles and the attempts by the likes of Dick Smith to reconnect with their customers in the way the customer wants to shop.
But it will take more than a catchy jingle and some jingoism to win back those shoppers. Big Retail needs to get smart. It needs to pay more attention and listen more deeply. It needs to face the Truth.
Simon Burrett is the MD of McCann Melbourne