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Retail Will Not Only Survive...It IS Surviving!

6/21/2017

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Picture
  You can divide today’s retail news articles into three categories:

1)    Store closures
2)    How the Internet is taking all the brick & mortar business
3)    The next must technological need retailers MUST have 
 

Article after article repeats the same negative information over and over.  When you look at the facts, they are telling a different story.  First, just this past April retail sales were up .04% after a first three-month slow start. And just last month, many retailers posted positive comp store sales increases.  How can that be?  Retail is destined to fail, it’s over, right?  Well, tell that to Ulta who saw a 14.3% increase in comp store sales their 1st quarter, which was close to 4% higher than expectations. Home Depot saw comp store sales increase 5.5%!  Even chains like Best Buy saw a 1.6% increase in comp store sales, and they were predicting a 1.5% decrease!  Other chains like Lowe’s, Five Below, Dollar Tree and GameStop all saw increases in comp store sales.  Why?
 
Looking at Ulta by example, they have been and are continuing to do everything right with strong customer focus and an amazing in-store shopping experience led by CEO Mary Dillon.  She is passionate about her brand, her employees, and her customers.  Through her leadership, Ulta makes shopping in their stores fun and exciting.  How many retailers that are struggling can say that?  You don’t see Ulta getting into other categories, or experimenting with new strategies.  No, they have found a winning formula, and they are sticking with it. Best Buy, the only remaining national consumer electronics chain, is succeeding as well because they too concentrate on what the customer wants.  Their company CEO, Hugh Joly, is not averse to change and trying new ideas, but he has kept the core Best Buy strengths and continued to expand upon them. 
 
Unfortunately, so many retailers are not doing what they should be doing to improve their business, and as a result, more will fail.  They will, of course, blame Amazon and competition as well as Millennials who no longer browse brick & mortar stores.  But again, look at the facts.  Today, still over 65% of all shoppers prefer shopping in a store and depending on the kind of retail, that could be as high as 80%!  In fact, today e-commerce sales have yet to hit $300 billion while brick and mortar sales are over $4 trillion!  That is a huge difference.  So, what are retailers to do?
 
1)    Hire CEO’s and Top Executives who are interested in growing the business: 
       Retailers need to hire executives who are passionate about the company, want to solve problems and  
       plan long-term strategies and growth.  Today, too many executives are only interested in short-term profit 
       because it affects their compensation.  Some retailers are paying CEOs today between as much as $14          
       million to $22 million, when you take into account base salary, bonuses, stock awards and incentives. If the 
       company is not doing well, this is not the time to spend that kind of money. Spend less on your executives,
       and reinvest the savings into your business with more staff and better training.
 
2)    Stop Chasing One Another: 
       Many retailers insist it is better to get into other categories to build sales rather than fixing the business they
       already have.  The problem is rather than gaining a competitive edge, these companies are just adding
       competition.  There may be some success early on, but in most cases, the success is short term because of
       the greater competition. In many situations, the next CEO will cut the category.
 
3)    Look At The Stores You Already Have: 
       So many retailers think that opening more stores is the solution to growing sales.  It may be true that new 
       stores bring in customers for a while, but eventually whatever store problems the retailer had with its  
       existing stores will be present in the new stores. Focus on the existing problems stores have first, and only
       after they improve sales should you consider opening more stores.  It costs millions of dollars to open new
       locations, and that money could be better spent investing on failing stores with more staff, better training
       and reasons for the customer to shop you. Use traffic counters and look at your conversion, not at
       transactions to see how much business you’re losing. Work at improving it before expanding.
 
4)    Listen To Your Customers and Your Employees: 
       It is so easy today for any retailer to not only survey customers electronically but to also look at social
       media and read what customers and employees are saying about your company.  If customers are
       complaining about not honoring policies, confusing coupons, bad shopping experiences due to unfriendly
       and unaccommodating store associates, then the focus should be to fix it.  When employees are writing
       negative remarks about unprofessional store management, weak pay, poor scheduling and useless or no  
       training, then that is the mission on hand because happy employees mean more satisfied customers, and
       that in turn means more sales.
 
5)    Stop Trying To Fix Problems through Acquisitions, Mergers, and Buyouts: 
       How many retailers think the easiest way to grow their business is to buy a competitor or merge with them? 
       In principle, it could be a good idea, but unfortunately, when your company already has major internal
       issues, buying or merging with another company who also has major issues will not solve a thing.  Instead,
       once the cost cutting savings are applied, including the reduction of staff, the retailer now has twice as many        problems to correct, which becomes much more difficult and often leads to a failed business. If you’re
       looking for the solution to come from a private equity firm buying your business, think again because after
       completing the sale, the retailer now becomes burdened with paying back an enormous debt, often putting
       the company into bankruptcy.  Sports Authority, Gordmans, HHGregg are just three retailers all bankrupt      
       in the last year who had been bought by private equity firms.  Gymboree, owned by private equity firm 
       Bain Capital, just filed for Chapter 11 Bankruptcy June 12th!
 
These five points, if taken seriously, can turn any failing retailer into a successful one.  If Best Buy, Ulta, Lowe’s and others are improving comp store sales during a time when retail is reported to be doomed it just goes to show that you cannot believe everything you read and most importantly if a retailer wants to be successful in today’s shopping environment, it can.
 
Art Suriano
CEO, TSi


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