When retailers are teetering on the edge, it’s tempting to assume they’ll fall. But coming back from the brink is possible… if retailers seize the day and face up to the challenges ahead.
The list of casualties is long and varied. Worldwide, the last two years alone marked the end of Sears Canada, the UK’s BHS, Australia’s Topshop and New Zealand’s Kiwi Clothing, along with US clothing chains American Apparel and THE LIMITED.
But there are exceptions to the no-way-back-from- the-brink rule. Retailers such as Best Buy, Starbucks and even the seemingly invincible Apple have all pulled off bona fide reversals of fortunes. Their triumphant revival strategies share some common ground, including a laser focus on core competency and a ruthless whittling away at whatever doesn’t serve.
When J.C. Penney plucked former Apple merchant Ron Johnson to be CEO, Johnson wooed high-end shoppers by eliminating sale events and adding fancy merchandise from the likes of Sir Terence Conran. The result: billions lost in sales. The retailer ousted Johnson, then came back from the brink by outright apologising to its core base of Middle American shoppers for abandoning them, bringing back bargains and coupons, and restocking the beloved store brands axed in the upscale makeover.
Overall, retailers that have managed a turnaround have done so by serving unmet needs (Best Buy); uncorking new revenue streams by building on existing brand equity (Starbucks); pivoting to a shifting consumer base; and evolving with changing shopper tastes and habits.
Few retailers lose their way and find their way back. Comebacks are hard to come by in retail.
Righting a retail ship also calls for the unglamorous-but-critical work of getting one’s operational house in order.
Merchandise is the lifeblood of every retail organisation. And if you can’t get the right inventory to the right shopper at the right time because your supply chain is a mess, nothing else much matters.
Best Buy’s revival not only affirms some integral elements to successfully delivering real change, but also speaks to reinvention in the age of Amazon. The consumer electronics chain responded to changing shopping triggers, found a way to answer an unmet consumer need, and gave shoppers something online retail could not.
It was a very different story back in 2012. The retailer was battling obsolescence as Amazon undercut its prices, and seemed helpless amid showrooming, when shoppers browse a store for an item, only to later buy the product online for less. New CEO Hubert Jolly brought in big changes. Best Buy has added services and experiences online can’t provide, such as hiring hundreds of salespeople to make pro table home visits and offering free, personalised electronics recommendations.
The chain also reinvested a portion of these profits in technology to boost its supply chain speed and efficiency, with the goal of offering US shoppers next-day delivery. The results have paid off: Best Buy has boosted sales and earnings while gaining market share.
Then there are the revivals shepherded by iconoclastic CEOs like Apple’s Steve Jobs and Starbucks’ Howard Schultz, who are etched into the DNA of the company. Their turnarounds have sprung largely from an intangible, yet intuitive, feel for their businesses.
Schultz left Starbucks in 2000, returning in 2008 when the coffee chain was struggling, beset by over expansion in the US. He reinvested in service via the human touch with baristas, moving away from cookie-cutter locations, giving each coffee house a favour that reflected the region it served.
As buying tangible things has become unprecedentedly cheap, easy, and unlimited with the endless aisle that is online shopping, consumers are looking for retail venues that do more than just sell things to get them out the door.
Retail is both an art and a science. It seems retail reinventions must be that, too.
This article was originally published in Counter Culture 6 | The Performance Issue.
Barbara Thau is a New York-based business journalist and contributing retail reporter for Forbes.com, also covering consumer news and lifestyle trends for publications including CNBC, The New York Daily News and Fortune.com.