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On Sears and Retail

Posted by on Oct 21, 2017 in Ryan's Thoughts | 0 comments

On Sears and Retail

A couple of weekends ago I went to a shopping mall. What was perhaps even more unusual for me was that I took my entire family with me and we did some real shopping – going from store to store, trying things on, comparing prices, and finally, purchasing items. It just so happened that the day I went to the mall was also the final day that the local Sears store was open for business.

There will undoubtedly be several books written about the failure of Sears as a company. Companies close their doors all the time, of course, but I think it’s truly remarkable that Sears is one of them. If ever there was a business that should have been at the forefront of the juggernaut that is online retail, it was Sears.

From Wikipedia:

Farmers did business in small rural towns. Before the Sears catalog, farmers typically bought supplies (often at high prices and on credit) from local general stores with narrow selections of goods. Prices were negotiated, and depended on the storekeeper’s estimate of a customer’s creditworthiness. Sears took advantage of this by publishing catalogs offering customers a wider selection of products at clearly stated prices. The business grew quickly. The first Sears catalog was published in 1888.

In 1893, Richard Sears and Alvah Roebuck renamed their watch company Sears, Roebuck & Company and began to diversify. By 1894, the Sears catalog had grown to 322 pages, featuring sewing machines, bicycles, sporting goods, automobiles (produced from 1905 to 1915 by Lincoln Motor Car Works of Chicago, no relation to the current Ford line),[7] and a host of other new items. By 1895, the company was producing a 532-page catalog. Sales were greater than US$400,000 in 1893 and more than US$750,000 two years later.[8] By 1896, dolls, stoves and groceries had been added to the catalog.

 

The modern day parallels to Amazon are incredible. By 1896, GROCERIES had been added to the catalog – hello Whole Foods! I can just imagine the naysayers of 1897 complaining that Sears was killing local businesses and driving the Family General Store out of town.

Sears built it’s business from shipping. For a century Sears was the king of mail-order retail. Long before telephones were common in rural areas families would gather around the Sears catalog, select clothes or Christmas presents (or even a HOUSE) and then drop a check in the mail and eagerly await the day that their goods would arrive at the post office.

How could this company POSSIBLY have failed to adapt to the internet age?

Amazon is now the king of online shopping, and as they continue to expand they are in a rush to gain a local presence. They are putting up their own brick and mortar stores to ease shipping, they bought Whole Foods to help them expand their network, and they’ve partnered with local agents to set up ‘pick up’ locations throughout your city so that people who can’t have packages left on their doorstep can still take advantage of the ease and convenience that comes from online shopping.

For many decades Sears, in addition to their catalog business, had brick and mortar stores in hundreds of communities, where people could go to try things on or pick them up in person. For decades, Sears partnered with local stores in the tiniest of towns so that rural communities and people without a porch could take advantage of the convenience of mail-order.

There is a growing amount of commentary about the death of retail – Toys ‘R’ Us filed for bankruptcy protection at around the same time – but how can that be? Walmart is continuing to do well, Amazon is expanding into physical retail locations, and even the above mentioned shopping mall is succeeding in some areas. Best Buy, which everybody claimed was going to shutter its doors in the face of the internet, has managed to turn itself around and stay relevant.

So why did Sears, whose practices mirrored those of e-commerce 100 years before the internet was created, fail?

Amazon is, in many ways, following the same path as Sears did during their growth years. Amazon has been my default store for a while for everything from shaving cream to books and Blu-rays to Christmas presents. It’s not that I don’t ever remember shopping at Sears… it’s just been a long time since I had. Shoppers have always voted with their wallets, and if a certain company provides a more pleasant shopping experience, with better selection, and better value, then they are going to win out in the long term.

The most important of those is the shopping experience. Keeping the stores tidy, keeping them stocked with the appropriate merchandise, keeping them staffed to appropriate levels, and making sure that those people treat your customers with respect.

There are countless books written about Customer Service (I recommend anything by Lee Cockerel as a starting point). Staffing levels can be monitored by analyzing year over year trends and making adjustments – erring on the side of too many staff rather than too few to deliver great service.

The appropriate merchandise and stock levels are, I think, where today’s stores often go wrong. Amazon has almost everything that you can possibly imagine in stock. Not just items that are blockbuster sellers, but also items that are difficult to find in other places. One of the most important questions you can ask in business, marketing, or life is “Why?”. Why do we exist? Why do people shop here? Why do we carry this item? It’s very easy to look at sales year over year and start cutting SKUs based on poor sales. But if you don’t ask why people are buying certain things, you can end up alienating your customers. Keeping your inventory turning over is more important than ever, but making sure that you have some key pieces in stock is almost more important – there is an opportunity to build brand loyalty.

For whatever reason I am a Home Depot loyalist. I love wandering through the aisles, and if I need something home related I ALWAYS go there. For a few years of my life I spent so much time in Home Depot that I often knew the store better than the part-time employees who worked there. Even once Lowes opened up in my city, I continued to shop the Home Depot. Once, I was looking for a specific piece to repair a drawer – I had seen them before at the Home Depot, but I couldn’t find them when I needed them. An employee told me (once I could finally find one) that they no longer carried them because they were not a good seller. What was I to do? I wasn’t going to replace my cupboards because of a $2 drawer guide! I went to Lowes where they had a wide selection of drawer guides. The next time I was looking for bathroom fixtures? Instead of going to the Home Depot immediately, I thought I’d check out what Lowes had to offer.

Too many people think that stores compete only on price. At a higher level, they compete on inventory. If my local drug store is always out of deodorant when I go in, then I’ll add deodorant to my Amazon cart next time I’m buying a book online (because even though I love browsing at my local Chapters Indigo store I don’t trust them to have a copy of Marcus Aurelius’ Meditations in stock when I pop into the store.)

Sears knew for years that things were going down. Rather than do something about it, they doubled down on the things that were driving them out of business. They could have shrunk their stores, changed their inventory, pivoted (Why didn’t Sears buy Whole Foods?) Instead, every Sears on the planet assaulted you with makeup and perfume counters, racks and racks of clothes fewer and fewer people wanted to wear, a dwindling selection of tools, and they spun off their most profitable segments – furniture and appliances – into new stores while still keeping their giant flagship stores open at full capacity.

Retail stores (all businesses, really) exist to solve problems. If you don’t know what problems your business solves, then you should do some deep thinking about your purpose and why you exist, and why you will still exist in 10 years time. Use data to determine not just what your best selling products are, but also why they sell! Look at your competition – what new areas are they exploring? What appears to be working for them? What do they seem to be failing at? Is that something I should try with my business? What problems do I have? Is my advertising converting to sales? Where do my customers find out about new products and services?

Far too many businesses feel that they have a right to exist – they don’t. If their business model is not working, doubling down on it and hoping things are going to improve is not a business strategy. At some point, someone at Sears decided that they were too big to fail and leadership decided that they knew best what to do with their company. As terrible a loss as it would have been to, for example, close all the flagship stores and focus on making Sears Home successful, I’m sure that the thousands of people who’s jobs would have been saved would have preferred that strategy to what they are facing now.

Don’t let it happen to you.

Procedures vs Infrastructure

Posted by on Aug 20, 2017 in Ryan's Thoughts | 0 comments

Procedures vs Infrastructure

This is a topic that I’ve wanted to write about for some time, but its always been a slightly vague idea in my head, one where I really felt the lesson was important, but in which I needed a clear, simple example. I finally found the perfect example last week at Disney World.

Often when faced with a business challenge the first thing I’ll look at is whether I need some kind of procedure or checklist in place to prevent it from happening again. I’m a big fan of checklists – my computer wallpaper is even a checklist! (If you’d like to learn more about checklists, read The Checklist Manifesto by Atul Gawande). However,  a checklist or procedure isn’t always the right solution. Sometimes there is a fundamental infrastructure problem in what you are trying to do, or perhaps it would be much easier and more effective to make an infrastructure change rather than adding items onto a to-do list.

I was very fortunate to go to Disney World with my family recently. I read a lot about Disney: books on customer service, books on leadership, books on innovation – I even have a Disney podcast on my playlist. One of the oldest stories about Disney is that the parks are incredibly clean, that there is no garbage anywhere, and that they have staff walking around constantly picking up even the smallest bits of trash.

First of all, it’s true: Disney World is an incredibly clean and tidy place. It’s also true that I saw maintenance staff pushing carts from place to place and a lot of what I assume where managers walking the park with long grabbing sticks to pick up garbage. Here’s where the myth fell apart for me though – I didn’t actually see them picking up garbage very often. And that’s because there was rarely garbage on the ground.

See, one of the so-called ‘Secrets of Disney’ is that there are garbage cans placed no more than 30 steps away from any place in the park. It’s true – there are garbage cans EVERYWHERE. Because garbage cans are so easily accessible, people just naturally use them rather than litter. This means the park is kept clean without the staff having to do anything. Then, when you add in the efforts of the staff, they can pick up the loose bits of trash and take the park from clean to immaculate. This was punctuated by a day spent at Universal Studios, which was clean, but not immaculate. The obvious difference? Fewer trash cans and fewer staff walking around.

I love this on so many levels. First, it recognizes that people are all inherently lazy and want to do the minimum amount of work possible (visitors and staff). It’s also a neat bit of social engineering. Because there are so many garbage cans available, you see a lot of people using garbage cans. Because you see people using them, you are more likely to use them yourself! Finally, because the park is so clean, you also want to keep the park clean (check out Broken Window Theory for more on this topic).

Disney takes the ‘magic’ a step further by making sure that the cans themselves are spotless. I’m  a bit of a germophobe, and I hate touching the flapper doors on most garbage cans. But I saw so many maintenance people wiping and cleaning the cans at Disney World that I had no problem popping things into them!

Some managers, when faced with a garbage problem, might place signs asking people to throw out their trash. Others might demand that all staff members pick up at least 60 pieces of garbage an hour as a performance requirement of their job. They might create a log sheet where each employee must sign off that a can was checked/cleaned and when.

But how many would decide to add twice the number of garbage cans that are ‘necessary’ and place them closer to each other to avoid the problem in the first place?

Where can this idea fit into your business? Perhaps you have a sink that’s always full of dishes, and the cupboards a plastered with signs asking people not to leave their dishes there. What if you bought a rack to put beside the sink for people to put their dirty dishes in?

Maybe you have a more serious issue, such as expense reports not being handed in on a regular basis. Perhaps you could include an expense claim form in the envelope that has your employees pay stub at the end of each month. Or perhaps you could move the entire expense system over to one that scans and sends emails to the accounting department. Use the credit card, snap a photo of the receipt – and done! There might be a bit more work for the accountants to put everything together upfront, but perhaps they save time in the end because they no longer have to spend their days tracking down folks and begging them for receipts.

Here’s another take on the idea.

How to Sell a Tent

Posted by on Mar 7, 2017 in Ryan's Thoughts | 0 comments

How to Sell a Tent

You’ll never sell a tent by saying its waterproof.

You’ll rarely sell a tent by talking about the size.

Campfires sell tents.

Hot dogs sell tents.

Friends and families sell tents.

Shooting stars sell tents.

Wet swimsuits on a rope between two trees sells tents.

Adventure sells tents.

The fact that your tent is waterproof only plays into the equation when rain comes while someone is out doing all those other things. If your tent passes the test, your brand story will become “I was out at Buffalo Pound last August when a huge storm hit. It poured all night, but we were completely dry the next morning. I love this Cabela’s tent! It’s never let me down!”