Myers CEO – gone
DJ’s CEO – gone
Marks & Spenser – shuttering 10% of network
House of Fraser – in crisis mode
Every specialist electronic chain worldwide – gone (almost)
Toys were Us worldwide – gone
Specialty Fashion Chain – sold for a fraction
Lowy’s – collected their money an ran
Discount department stores – crisis worldwide
Godfrey’s – acquired by 99 year old founder and dismisses entire board within 24 hours

We certainly live in interesting times. In my opinion we are now at or very close to a tipping point. As more volume moves online to an increasingly fragmented distribution chain, managing a traditional retail business will become increasingly more difficult.

If retail as we know it is to survive the model must change. The key input costs of rent, staff, inventory and advertising need a step change downward to stay in line with reduced sales and reduced margins. Nothing short of a radical new model will avert being boiled to death.

The holy grail here is cracking the browsing nut. Online is excellent at delivering info and facilitating the sale. What it is not good at is showing you what you don’t know. AI is getting better at identifying what you might like based on your previous behaviour, but discovery is a concept not well catered for in an online world.

Maybe it’s time to let the amazons and Alibaba’s to take control of the logistics channels and turn back to an Argos showroom model,but on a much bigger scale. Retailers manage the customer facing aspects while manufacturers fund the inventory sitting in the Amazon warehouses. Instant gratification takes a back seat but maybe it is a model that can be sustained.

It sure is hot in here.

I think that we are at the start of a pretty fundamental change in the retail industry.
This is being played out profoundly in the fashion segment. In the last 3 months we have seen a large number of mid tier retailers fail ( Payless, pumpkin patch, Marc’s, Howard’s storage, plus numerous others) this is being driven by the overhead in running a brick and mortar store in the face of reduced volume as this is now shared across offline and online players. Just have a look at the fall out in the states over Xmas ( Sears, Macy’s, gap,limited, American apparel)

What this is doing is making the offline shopping trip less compelling. There are less shops therefore less choice. This can only accellerate the decline. Landlords can slow this decline by readjusting rentals, but this is a hard pill to swallow and it will only slow, not stop the process.

So what does this mean? I think we will see offline move to more utility/commodity/service related purchases and online move more to the high involvement considered/descretion purchase.
Product freight requirements will also impact here. Ugly items will still be offline.

Winners
Warehouse stores – Costco etc
Greenfield discount department stores range adjusted to commodity
High street variety stores-
Big box hardware
Home delivered takeaway food
Installation/service retail
Furniture

Losers
Boutique fashion/fad
Shopping centre food
Shopping centre department/discount department
Electrical

The next 2 years will be telling.

This then flows on to ” discovery” online is really bad at satisfying browsing. With the advent of more and more targeted algorithms to narrow what you see, how do you get to know what you don’t know.

My feeling is that word of mouth recommendations endorsements from friends and colleagues will gain far more weight in the buying process than it now has.

We live in interesting times

 Just over 25 years ago my partner Desiree and I decided to cement our relationship by purchasing two new sofas from a small furniture manufacturer called King Furniture. They had one showroom in Alexandria Sydney and had a reputation for producing some quality furniture. We wanted something that would last as we could not afford a home at this point, a pair of quality sofas was a measure of committiment to each other. We visited the showroom and purchased two beautiful leather sofas plus two ottomans that were “aubergene” in color, some people would call them purple.

Fast forward to March 2015. Desiree and I are still together, and yes our two “aubegene” sofas and ottomans still sit pride of place in our house. In fact this is the third house and is over 700 km’s away from the Alexandria showroom. The sofas have taken on a “magestic pattina” over the years as a result of kids, grand kids and a menagerie of pets and vistiors who have all lounged on the sofas.

A few weeks ago we had the unlucky occurance to knock one of the feet off one of the ottomans.

The foot was a sturdy plastic piece that had a number molded into the base. I thought what the heck, I will look up Kings on the Internet and drop them a note to see if they can help.

This was the start of a short but remarkable journey. In less than 12 hours I had a reply from “Lecia” from Kings inviting me to give her a call to see what we could do.

I called Lecia and explained my dilemma. After 25 years I had forgotten the name of the model sofa, she said just wait a second. She then proceded to pull up my original sales transaction, “just let me confirm your address” she said “to make sure I have got it right.” She then confirmed where we had lived over 25 years ago. “You purchased two sofas and ottomans is that correct.” I confirmed the details. “We discontinued this model many years ago, but I think I have a solution, just let me check with the boys out the back, I will call you back.”

I hung up the phone trying to reconcile what had just happened. Within a few minutes the phone rang, it was Lecia, “I just checked witth the boys and we changed the foot of this model when our parts maker changed from imperial to metric measurements, however if you make this slight adjustment this part will fix your problem.” She went on to explain the slight modification and then added “I have put 8 replacement feet into a post pack, can I confirm your new address”. I asked how much I owed her and she said “nothing”.

Within 3 days the replacement feet arrived and within 10 minutes the “lame” ottoman was back to new condition.

I am still in awe of this level of service, lets just deconstruct what happened here.

1. 25 years ago the world wide web was less than 12 months old, ecommerce would not emmerge until 1994 and would not be really viable until 2000 when security protocols advanced to a point that made people feel safe.
2. Point of Sale systems in retail stores where either manual or “land locked” proprietry systems.
3. At some point in the last 25 years someone within the King Furniture organization realized that the legacy data held was valuable, but there needed to be a “key” to unlock this data. This key would no doubt come at a cost, but that cost was seen as an investment.
4. Someone was charged with taking, who knows how many years of customer transactional and product model, component and spare parts data and putting into a form that can be accessed across the organization.
5. A system was then deployed that would allow fast and seemless access to this data.

The result has produced a customer service tool and archive second to none. In a world where decisions are increasingly made on a “business case” basis, it is good to see a company that understands that the very nature of “business” means taking a risk. Investing in legacy data must have been seen as a risk, but today in a fast commoditizing retail world that risk is about to pay off in “spades”.

Long live the King………………