Are legacy retailers on the right track or heading off the tracks?




Walking both the floor at NRF and the city stores of New York last month, it was hard for me not to look at our industry through the lens of “Retailing 2020: Winning in a polarized world,” a 2011 report by PWC and Kantar. Eight years later, it was fascinating to see how close their forecasts came to hitting the mark.
The report talked about the impending challenges of properly positioning retail brands to master a highly dynamic marketplace. The primary focus was on a view of an increasingly polarized world — and how that translates to our sector. Their view was that retail would fragment into low price/low experience versus high price/high experience. The authors didn’t predict the hyper-speed with which Amazon.com would spread its tentacles, but they sure nailed the basics of most everything else. Their message to those in the middle was: differentiate or die. Many didn’t heed the advice, and they’ve either died or are in the slow agonizing process doing so.
Thinking about this further, the polarity within retail’s leadership attitudes came to mind. PWC never expected that so many would fail to react decisively to both disruption and opportunity. Wall Street certainly hasn’t supported retailers taking confident risks to bullet proof their company’s futures. Stunningly, many retailers have chosen to go out of business rather than make the good decisions necessary to survive.
Pulling back the microscope, I realized that the retail phenomenon we’re currently enduring is nothing more than life on its typical course of evolution. Our world is changing, culture is ever-evolving and technology is altering almost everything about how we live, shop, communicate, create and problem solve. We must evolve accordingly or get left behind. So, why are certain leaders refusing to embrace this and move into the future? Is it ignorance, arrogance or bonus-oriented motivations for short-term, short-sided results? Maybe it’s something else, but what?
- The Vision Of Retail 2020: On-Track Or Off-The-Tracks? – RetailTouchpoints
- Retailing 2020: Winning in a polarized world – Kantar
DISCUSSION QUESTIONS: What do you see as the biggest challenges facing legacy retailers today? Why are retailers failing to take decisive leadership actions when recent history suggests that being unwilling to do so may lead to their own demise?
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22 Comments on "Are legacy retailers on the right track or heading off the tracks?"
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President, Integrated Marketing Solutions
The stark reality is that legacy retailers cannot survive on the horse they rode in on. Customers keep moving the goal posts. What was extraordinary yesterday is ordinary today. Size and legacy won battles in a product-centric retail world. The winning the race today means winning relationships with customers, however and whenever they want to shop. Yes, it is hard to change. However, today’s customers don’t reward effort. They vote with their wallets and digital pays for retailers that create the most relevancy for them.
Founder, CEO & Author, HeadCount Corporation
There appears to be a knowing-doing gap — retailers know what to do, but they just don’t do the right things. The level of distraction among retailers is acute. This is particularly the case for the application of technological solutions that they hope will drive their business along with paranoia of Amazon and market pressure to find a way to out-compete Amazon. Ultimately, it comes down to leadership or lack thereof. There are some very capable and brilliant people running retail operations, but part of the challenge is how they are incentivized — not on long-term growth or customer experience but rather, quarterly results, comp-sales and stock price which can easily be boosted by stock-buy backs and other financial engineering.
Chief Executive Officer, The TSi Company
Chief Customer Officer, Incisiv
This could be a really LONG post but I will try to boil it down — there are several challenges and reasons for lack of decisive leadership (debt, old systems, short term thinking) but I’d boil it down to one primary thing. Many legacy retailers have legacy mindsets and legacy cultures. It is shocking that study after study is released and failure to embrace change still ranks at the top for laggard retailers. If by this point, legacy retailers haven’t woken up to the need for culture change — it’s time to get new leadership that will.
Director, Retail Market Insights, Aptos
Well said, Dave! Managing — and embracing — change is, in my opinion, far and away the most critical challenge facing our industry as we look ahead.
Director, Retail Market Insights, Aptos
Great article, Laura! By looking back in order to illuminate the way forward you have given an excellent perspective on our current state, and how retail needs to evolve to thrive. And as Chris mentions, change is the centerpiece of the challenges we face. The pace, frequency and scope of change facing all of retail, in my opinion, will remain the key threat — and opportunity — for retail for the foreseeable future. Success will require enterprises that thrive on change, rather than merely tolerating change.
Vice President of Marketing, OrderDynamics
Most retailers are trying to change. But what I see is a slow pace associated with the right strategies, and often a focus on the shiniest new object. It highlights the need for the “smartest tech ever” rather than the “coolest tech ever.” An exceptional example of the slow pace of strategic adoption is omnichannel retailing. We have talked about this to no end, in retail. Yet our latest research (Omni-2000) showed that only 27.5 percent of U.S. retailers have it in operation today. This despite claims from other reports that 63 percent of retailers have it — or are working on it.
Managing Director, StoreStream Metrics, LLC
Meaningful change requires innovation and innovation requires taking risks — all of these live in the shadow of fear, uncertainty, and doubt. The FUD factor is further amplified by Wall Street’s need (or greed?) for short-term financial rewards. One fiscal quarter isn’t enough time to innovate anything. Meaningful innovation takes commitment and hard work at every level of a corporation. It requires constant and relentless energy to have any chance of success. It is far easier to make cosmetic PR changes (e.g. robot greeter) and stay the course. When CEOs are paid tens of millions of dollars each year, there is little or zero incentive to change. If you’re completely pessimistic you may believe that some leaders actually want retailers to fail as it may be to their financial advantage (Think Sears?!) And while all these leaders are comfortable in the status quo, Mr. Bezos and Amazon forge and innovate forward every single day.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Laura nails it. “Our world is changing, culture is ever-evolving and technology is altering almost everything about how we live, shop, communicate, create and problem solve.” The changes, if not beyond the comprehension of the legacy retailers are beyond their business model to adjust.
When you spend 30 or 40 years solidifying yourself in a shopper’s mind, no matter what you do you are not going to change that image. The history of retailers (and most successful companies) is relatively short — 30 to 50 years. Those that go beyond that is quite astounding.
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
The oxymoron of legacy retail, the love-hate relationship of change. Nineteen years into the 21st century, most legacy retailers fear technology, lacking the courage to take a deep dive into enlightenment. Focused solely on quarterly earnings as the life raft of living another quarter. Lip service is the measurement of a lack of interest or awareness of technology and how it has changed the retail environment is now on full display.
Strategy & Operations Delivery Leader
Principal, Cathy Hotka & Associates
Retailers need to think like the customer does. Is the website intuitive? How does the store look? Strategizing won’t do any good if the music is too loud and the clothes are on the floor. Chris is correct that customers are moving the goal posts — and they’ll continue to.
President, The Ian Percy Corporation
Retail Consultant
I see two super large impediments to making the changes necessary to survive. Digitization (of everything from the store experience to the supply chain) is ground stakes for even being able to make the change much less willing. To do that both the CFO and Wall Street have to shift views from a predominantly CapEx model to an OpEx model. Amazon spends 10 times the average legacy retailer on digitization using an OpEx model (through AWS). The second big challenge is around a change of attitude at the top. Years ago Blockbuster had reached an agreement in principal to acquire Netflix for $100 million. The top leadership at the company pulled the plug because they were retailers (i.e. store guys). Customers don’t care. Until legacy retailers pivot from a product-centric worldview to a customer-centric service and experience worldview they won’t make the right financial and operational decisions to keep up with customers.
VP Marketing & Business Development, Estrella Brands
Approaching evolution as a “me too” and expecting similar results as the true innovators is a failure to recognize that they are following another retailer’s playbook. The best possible result is catching up, the worst is unnecessary cosmetic fixes akin to organizing the deck chairs while the Titanic sinks.
Founder, Grey Space Matters
Retail Transformation Thought Leader, Advisor, & Strategist
CFO, Weisner Steel
In general terms — if not precise detail(s) — they’re the same ones that have always been faced: guessing what the future might bring (and the perils of guessing wrong).
For example, a few days ago we had a discussion about Trader Joe’s dropping delivery. There was a lot of opposition to this move, though not a monolith of it, ostensibly because that’s what grocers are “supposed” to do nowadays (“…or you’ll be sorry”). But Tony O — you know, the one among us who actually sells things [in a grocery story] for a living — pointed out the obvious: it’s appears hopelessly unprofitable. So why this seeming abandonment of common sense? It’s someone’s (a lot “someones) guess as to what the future will be.
So if I were to describe the challenge in simple terms: not to forget fundamentals in following someone else’s paradigm.
Chief Data Officer, CaringBridge
The greatest challenges facing legacy retailers in today’s environment are two: developing and executing on an omni-channel strategy, with customers truly receiving the same products, pricing and benefits; and the challenges of developing and maintaining a superior customer experience in-store that clearly differentiates that retailer from other brick and digital alternatives.
The failure to invest behind these two initiatives has led retailers to where they are today. There is no easy answer anymore; retailers must invest to catch up, which inevitably will depress short-term profits for long-term gains. Balancing that with investor pressure is the hidden challenge for retailers today.
Founder, Branded Ground
This BrainTrust is amazing. Thank you for all of your thoughtful comments…it’s always enlightening to hear from peers about topics this pressing.
Global Industry Architect, Microsoft Retail
To me, the big challenge legacy retailers face is avoiding the tendency to try and be all things to all customers. Finding (or refinding/re-inventing) the niche is critical. There are things that are becoming “table stakes” or things you MUST have — an ecommerce offering is one of them — and the list of must haves will continue to grow over time, and most of these will be technology driven and enabled. Consequently having a hyper flexible approach to technology adoption is critical — something that seems to be a constraint in many legacy retailers today.