Measuring The Shift In Retail
Al Green’s popular song “Let’s Stay Together” may be about personal relationships, but its title is probably more like the secret wish some retailers have towards consumers who have abandoned them in favor of online retail.
The adoption of online behavior has lead to experts placing bets on what retailers will survive. Several, such as Sports Authority and HH Gregg, have been shuttered, while other such as Rue 21 are reportedly filing bankruptcy soon. NBC 4 Washington has a disturbing list of retailers said to be under threat.
The most potentially game-changing closure, if it comes to pass, would be Sears. The giant retailer, a staple in many malls across the country, has had several years of sales decline, and announced it may face bankruptcy. Other mall-anchor retailers have been close behind with sales struggles – Nordstrom’s and Macy’s notably – or are fighting tooth and nail to discover new opportunities.
Sears’ current era is a stark contrast to other retailers which are online first. They have innovated core operations and scaled sales through applied business intelligence – the holy grail of analytics.
Amazon, which has been at the forefront of the eCommerce retail movement, is experiencing a modern day version of the Sears’ evolution beyond its mail-order catalog. Sears evolved from its mail order business to serve as one-stop shopping for consumers’ household needs. According to Wikipedia’s account of Sears history, the retailer had its heyday expansion in the 1950s and 1960s, becoming the largest US retailer. It held that position until WalMart passed it in 1989. Today it operates 1500 stores total, down from 3500 locations in 2010.
So what lessons should retailers consider as the fate of Sears unfolds?
Apply analytics with relevant expertise
Successful retailers are gaining more than right-sized operations. They are making inroads into the use of advanced analytics.
Applying these techniques means relies on judgment about where advanced analytics can best serve an organization. Amazon has used machine learning to help predict likely purchase outcomes, driving not only its own sales, but also positioning itself as an attractive partner with other organization. That contrasts with the strategy from Sears’ parent company Sears Holdings, run by real estate mogul Edward Lampert. Sears Holdings invested heavily in its property, with Sears acquiring an even larger real estate footprint with its Kmart acquisition. While real estate can be valuable, unlocking that capital through sales and deals might not occur rapidly enough to be of help to a company’s earnings.
Analytics can save capital from poor-performing investments.
Amazon has not only built an online audience, it has expanded its resources into cloud services, consumer IoT technology like Amazon Dash & Echo, and an offline retail presence. It opened Amazon Go, a convenience store that features no check-out line as a real-world generator of customer preference, and a source of data for its predictive engine initiatives.
Now contrast that against Sears and its considerable investment in real estate. The holdings have left Sears burdened with mall locations that are experiencing declining foot traffic, which in turn has depressed sales.
Apply analytics with a coherent vision across an organization
The current blending of product and services comes from a strategy trend – the capacity to create a customer experience offline and online. Implementing it requires coordinating networked devices and services for nimble decision making. Many traditional retailers such as Sears have made strides to incorporate technology, but have not made fast adjustments to a marketplace that is moving at light speed to engage customers and deliver experiences.
Unleash a community of developers to create your solutions
Someone once said that software is eating the world. Well, analytics involves software, and more than ever retailers need developers to create offerings that enhance the software that impact customer experience. And the developer world has become more accommodating in supporting such an environment. Programming languages have frameworks, functions for addressing repeatable coding tasks, and libraries to implement algorithms. This makes repeatable tasks in development and modeling easier to create, run, and share results with colleagues.
Amazon is among the leading organizations attracting a developer community around its solutions. It announced a new program that will allow developers to build and host most Alexa skills using Amazon Web Services for free. But organizations across a number of industries are establishing communities of their own. Last spring I got to speak to a few Capital One managers at, of all places, OSCON, an O’Reilly Media conference aimed specifically at developers. Capital One’s presence – and OSCON sponsorship – was part of a larger strategy to attract developers for its open source development dashboard Hygeia.
Get In The Game…Now!
Sears lagged behind The Gap, which invested quickly in analytics, and combined website elements across its various clothing brands so that customers could shop seamlessly and easily. The result? The Gap’s eCommerce decision exceeded $1 billion in online revenue in a fiscal quarter, and did so for the first time back in 2009, years before Sears began experiencing declining sales and closing stores.
Retailers are starting to realize that analytics is essential for meaningful execution of strategy. Sears may have been too late in adopting, but it is not too late for others to integrate new tactics that can renew their relevance.