What chance is there of a retail revival in the wake of the additional pressure the Covid crisis has brought to bear on the sector? Here are three key reasons why retailers have struggled and a guide to how you can still pull your business back from the brink.
New research by KPMG Nunwood reveals that 80% of consumers intend to stick with the new retail channels they have adopted during lock-down. So if you are a struggling retailer waiting for things to get back to normal the message is ‘DON’T HOLD YOUR BREATH!”
Obviously, digital competitors are beating up, legacy retailers big time. It’s not even a contest, but there is an alternative to throwing in the towel as many have already done. Nevertheless, before you can plan your retail revival it’s important to understand what has gone wrong.
Let’s get a little perspective.
Retail used to be the pulse of the consumer. It wasn’t that many years ago that consumer goods manufacturers were relying on the feedback that received from retailers to manage their own businesses. How things have changed! It’s hard to understand how, with a few exceptions, retailers around the world have been so slow to react to the needs of customers in the digital era.
The exceptions of course, have been rewarded for their foresight, agility and innovation, Although the overall market may have shrunk, with almost half of consumers stating they are worse off now than they were prior to the Covid crisis, these forward-looking retailers have been able to grow. They’ve done so, in large part, because they’ve not been challenged. A digital business will always triumph over a traditional one and if you ignore them they’ll just triumph sooner.
It’s true that the disrupter challenge isn’t unique to retailing, but you could be forgiven for thinking retailers should have seen this coming. Before technology levelled the playing field by providing easy access for any business to intimate customer insights nobody had a closer relationship with customers than a retailer. So how did they screw it up?
1. They stopped listening.
In their efforts to improve the consistency of their customer experience (essential as a part of the brand development process) many retailers have wielded process like a club. Shop floor workers have been forced to follow strict instructions on just about every aspect of their work life. Their employers may have believed this was “training”, but it isn’t. In fact, it’s had entirely the opposite effect to good training. Effectively neutering shop-floor workers who may been the key to the solution. By eliminating discretion these retailers have effectively disconnected from customers. Worse still, it has also turned the connection between the front line and head office managers into a one-way street.
Understanding how a brand community works.
When a brand works as it should it becomes a community of six stakeholder segments. These include employees, drawn together behind shared values and beliefs and a common objective, encapsulated in the brand promise.
Smart businesses understand that the key to success lies in gaining commitment of stakeholders to the promise not the process and empowering them to use their discretion and apply their personal skills to deliver that promise. This is where the difference between training and instruction becomes obvious — training develops skills while instruction discourages initiative.
Retailers have also been guilty of ignoring messages that did get through. If they had been paying attention, they’d have noticed where things were heading. Then again, maybe it is more a case of burying their heads in the sand. It won’t be the first time the idea of “listening to customers” has been translated as “listening to customers as long as they agree with me”!
Perhaps the way things were looking for retailing was so far removed from the shape it had always taken some retail business leaders just couldn’t bear it. There were many retail executives in denial for sure. Even now I’m hearing comments like “We’d have been alright if it wasn’t for Covid”, which beggars belief.
In fact, the pandemic has been something of a let-off for many senior retail executives. Now, at least, they have something to blame for the demise of their businesses, which will help them perpetuate their self-delusion. But let’s get this straight, all Covid has done is speed things up a little. The writing was already very much on the wall.
Retail leaders certainly haven’t known what to do about digital disruption and this has manifested as the phenomenon I’ve called “transforminertia”. That’s what happens (or doesn’t) when a decision-maker finds themselves being ushered toward the door labelled “discomfort zone”.
Command and control leadership is pretty commonplace among retailers. I think it’s something to do with the hands-on nature of the sector. I can’t think of other types of traditional business where the most senior executives appear on the shop floor as retail executives do. However, that makes their denial of their customers’ message even less forgivable.
The thing about command and control (apart from it being wrong on just about every level) is that it is founded on the assumption of infallibility. The assumption that the boss is always right. Legacy leaders who have been brought up on this thinking believe their position is invalidated if employees suspect they are fallible.
Senior executives also know they will never be able to relate to technology as closely as the 60%+ of their workforce who were born into the digital age. The suggestion that they should migrate to a digital universe is way outside their comfort zone. They know it will reveal their fallibility and that results in their resistance to change.
2. They didn’t invest in digital infrastructure.
While on one hand small and medium-sized retail businesses may have struggled to muster resources to affect transformation, their bigger counterparts had problems of their own. When retail chains counted their outlets in tens rather than hundreds or even thousands the business leaders would have their finger on the pulse. Some were better at this than others, but generally the greater the number of outlets and employees the more difficult this becomes. It’s worse still for retail franchisors, who have a more complex chain of command to threaten the consistency of their brand.
Those retailers that are doing best these days gained an edge by being early adopters of technology. We are all now familiar, I hope, with the ability technology gives us to collect and analyse data, but not everyone understands how this applies to employees as well as customers. I’ve built a number of internal marketing programmes that have enabled my clients, not only to bring their employees together behind their promise, but measure their performance in this respect. These programmes also provide an intuitive communications channel that delivers valuable customer intelligence 24/7.
It doesn’t matter to a computer how many sources it is dealing with. It hardly makes a difference to the length of time it needs to analyse the data it collects. The simplest combination of hardware and software can complete an analysis in moments that it would have taken an army of people weeks to wade through only a year or two ago.
But technology is critical in every area of any business. It’s been clear in the relative performance of the big supermarket chains during the first lock-down, who has this sorted. Empty shelves in some bore witness to disconnected supply-chain technology, but supermarkets weren’t alone. DIY and other retail sectors with lower purchase frequency have shown even greater discrepancies between retailers’ technical capability.
This has been a wake-up call to some, but their rush to introduce the technology they need has caused awful mistakes to be made, resulting in wasted time and money and a great deal of pain. Many businesses, panicked by their looming demise, have rushed to adopt technologies at any cost, many even compromising their business in the process by building expensive infrastructure that won’t satisfy their needs. You only have to look at the UK government’s track and trace, or testing technology to see how spectacularly things can fail when people who aren’t intimate with the technology try to lead a transformation. It may be understandable why these people feel vindicated in their views about digital when an initiative fails.
There’s no cutting corners with this, but if you know what you are doing you can introduce technology efficiently. Remember the hare and the tortoise? I urge any business to clearly define their objective before they roll out any digital initiatives and devise fail-safe processes that ensure the decisions you make keep your retail revival on track. This is another important facet of brand development that reinforces the need get your brand right. Otherwise you could find yourself a passenger on a technology train that’s accelerating in the wrong direction.
3. They failed to recruit the right people.
How many businesses do you know who handed the transformation baton to their tech team? A big mistake! Hindsight shows us that businesses that have put their tech team in the driving seat have mostly failed. Building a sexy digital infrastructure and then looking to see what you could do with it will only repeat the biggest mistake of past businesses and severely compromised your future. Worse still is to build an infrastructure that automates an existing model. It’s not the IT team’s responsibility to create your business strategy. Their job is to build the machine that facilitates it. Before they can do that they have to know what the objective is. You must define your objective before you deploy the technology you need to achieve it most efficiently. Anything else is just accelerating toward the abyss.
There’s a complex situation emerging in this regard too. It’s hardly surprising that transformations led by marketers tend to be more successful. After all, marketers are supposed to be the link between a business and its customers. Sadly the same senior executives that have failed to understand transformation have also been guilty of under-valuing the marketing role. These days all businesses are marketing businesses yet fewer than half of businesses have a marketing seat on their board. This, in itself has caused the dumbing-down of the businesses concerned and left them under-skilled in this vital area.
Nevertheless, it’s rare that a traditional organisation will already have people on board with the perspective to strategise and mentor your transformation and there are areas of expertise that most certainly won’t exist in any traditional business. It’s also essential to divest yourself of all preconceptions and legacy attitudes, so employees who have been with you the longest, while they may plan an important role in your transformation, are unlikely to be the right people to lead the initiative.
Smart businesses started recruiting years ago. People with the necessary skills are thin on the ground and are expensive hires, so if you are only now making a foray into the digital world you are probably going to have to turn to contractors or consultants to affect your retail revival. However, this is not a bad thing at all. It will definitely mean your transformation is less likely to be compromised by legacy and it will also give you greater agility, especially if your transformation lead has a process you can plug into that ensures the many projects involved in a transformation are coordinated for maximum efficiency.
Where do we go from here?
Your first step in your retail revival though remains to define your marketing strategy, create your brand model and start building your brand community. This will enable you, or your transformation lead, to identify the resources — including the people and expertise — you need.
If you still believe that retailers are doing as well as they could, take a steer from hot-off-the-press research by Arlingon commissioned by Axonify. This reveals retailers aren’t managing their relationships with their front line workers anywhere near effectively.
Already inadequate training has been far too slow to shift to on-line models and communication is sadly pretty feeble. As a consequence only 40% of front line employees trust the information they receive from employers and fewer still (39%) say it’s timely. The big reveal though is that only 39% of front line employees are now confident in their preparedness to do their job.
Clearly those vital brand communities are falling apart. It’s hardly any wonder that so many retailers are struggling right now and it’s this failure rather than Covid that has brought them to this point. If businesses had been concentrating on their brand in the first place the consequences of Covid would have been less severe for many.
Is there time for a retail revival?
If you aren’t already in the road to transformation it’s going to be tough. For sure, it will require a different approach to that taken to transformations to date and if it’s left to senior executives who have already failed to react to take on the challenge alone, they’ll certainly need external support.
Looking on the bright side however, it’s clear that those who move fast to make up ground and get it right have a bright future. So I suggest you get on with your retail revival!
November 9, 2020