This is an essay about retailers. Actually, the start of a series of essays. And technology. And how they go together and are massively disrupted.
I will try to bring a little of my experience to the table here. First, a little about me. I’m an IT architect, and have been for a very long time. I’ve worked across a variety of industries – finance, contact centers, hospitality, and retail. I’ve spent the last 8 years in retail. Which is a really short amount of time compared to some of my colleagues. But it’s enough that I’ve made some observations. My company is a big, old-school retailer. Now is one of those awkward moments when I assiduously avoid naming it. Suffice to say, it’s a Fortune 50 retailer that’s been around for decades. There’s a lot more history in this company that I have, which I’ll tap into here. I’ve done a few tours through various parts of this industry – distribution, transportation, merchandising, store management, and recently marketing/loyalty. I’ve touched the technology that makes just about every part of this machine tick. Now on to the substance. Of course, because it’s the substance, everybody has already weighed-in with an opinion, from the analyst heavyweights, to the niche retail wonks. What makes me think that I can add anything to the dialog? Just an insiders view, an obscured employer, candor, and a lot of don’t-give-a-shit.
Most big retailers that have not started in the last decade or so are one of two types: store-driven, or merchant-driven. Almost none are genuinely customer-driven. In both of those modes, there are business organizations that are in the drivers seat making decisions about how processes should work, how assortments are determined, how pricing is set. It used to be that those business people ran their processes with ledger books and letters. Then IT came along, and made some of that work easier, but the core work was still in the wet-ware of the business people. Technology was an enabler only.
That time is gone. In a big retailer today, the business is too big and complicated to be held in the brains of business people. It used to be that a general manager of a distribution center might appreciate the help of a labor management system, but could run her business just fine with a spreadsheet and a print out. It used to be the same for a store manager. Or a merchandising category buyer. That’s not true anymore. None of those people in big retail is able to run their lines of business without the technology that does the heavy lifting for them. Technology has moved from being an enabler, to being the business. There is no “IT vs. The Business” anymore. And people have to figure that out. Fast.
That freaks a lot of people out. It freaks out all the business people that recognize that their era of thought dominance is waning. It freaks out the IT people who were used to having the business people spoon feed them requirements about what to do and build. It freaks out the executives that watch their core business falter without understanding quite why last year’s strategies aren’t bringing in the same results, because they don’t understand the seismic shift that has taken place under them. It freaks out the whole company as they watch “impudent start-ups” (like Amazon) that were born as tech companies eat their lunch down to the last crumb.
The solve isn’t that hard, however. It’s pretty much like business has always been. Look at the ones that are winning, and do what they do. Mostly. That’s hard for companies that have been the winners for a really long time and their hubris blinds them to their decline. Fortunately, there’s one person that an executive can’t ignore – the customer. And the customer is speaking. Speaking more loudly than ever before, with the stunning amplification of social media. And that is the voice that guides winning businesses. Not only are the days of technology-optional business processes long gone, but so are the days of merchant-driven strategies. The days of a small group of buyers or category managers thinking about “what will the customer respond to” is gone. Under the marketing strategy, under the designer partnerships, we have to be relentless about adding value to customers. And value-add is a moving target. Every retailer that ups their game with customers will be chased and caught by the others that are paying attention. Every innovation will be commonplace in 12-18 months. Suck it up and get used to it. The only path is to innovate some more. We’ve got to be listening to customers, and raising the bar on adding value constantly. Brand loyalty is a product of adding value, no longer an affinity that merchants can assume. All this, while presumably not going out of business – which is the fallacy of competing on price alone. The customer is telling merchants this all the time. With their bread-crumb trail of social media sentiment. And their dollars. The retailers that are winning are the ones that are customer-obsessed, such as Amazon (again) or Nordstroms. They happen to also, not so coincidentally, be retailers that embrace technology and are ruthlessly data-driven to their core.
So, modern big retail is pinched more than ever by a flanking paradigm shift – technology-infused everything has taken over their business, and customers are demanding unprecedented attention and value – their expectations driven by their own spectacularly tech-infused brains with access to information and choice that was the domain of super computing only a decade ago.
OMFG. What’s a stodgy old retailer to do? Well, dying is always an option. We could all be Circuit City 2.0. Assuming that you don’t want to just pack it up (although with CEO salaries where they are, that’s got to be viable for them), there is really only one way forward. Embrace and listen to your customers, and become a technology company. Those are two themes that I’m going to explore. Embrace your customers. Become a technology company. I’ll get there.
In the meantime, I’ll leave you with this thought, courtesy of Charles Darwin. It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change. And modern big retail has a lot to learn from that. It’s either adapt, or race to follow in Montgomery Wards’ footsteps.