First there was Sleep No More, an immersive production of Macbeth that redefines theater, staged in the multi-storied McKittrick Hotel on West 27th Street in Manhattan. It opened in 2011 and ever since, Venetian Carnival masked guests wander around the stage set on four cavernous floors, mostly lost and frequently confused, becoming the accidental audience of various scenes of Shakespeare\’s noir tragedy. It is fascinating and somewhat unsettling. The cast of actors transport you directly into the heart of the play, as you watch invisibly on the sidelines. Tickets cost $100 to $300 (there are dinner packages) and to date, thousands of people have experienced Sleep No More.

Then there\’s Meow Wolf, an immersive meandering art installation in Santa Fe that makes Disney look slick and disingenuous. An art collective\’s parallax version of an unfolding story, Meow Wolf has the spirited sense of humor of a walk through the looking glass for children of all ages. It\’s Burning Man indoors, full of outsider art crafted by the disruptors of the Santa Fe art scene. It has hit fans by storm since it opened in 2008 and Meow Wolf is now planning to open in Vegas, Denver and Washington DC, which might be the best pubic service possible for our government officials so under siege. Adult tickets cost $29 and over one million people have experienced Meow Wolf-Santa Fe has 83,000 residents.

Now there\’s Showfields, an immersive theatrical storytelling journey in a multi-storied building on Bond Street in lower Manhattan. This experience is neither strictly art nor theater, and according to the Showfields team, it is \”the first interactive experience bridging art and retail. Designed by an interdisciplinary team and a creative collective of founders, entrepreneurs, curators, architects, artists and scientists, the show bridges the gap between retail and experience.\” Showfields boasts an ambitious promise as \”the most interesting store in the world.\” That is a matter of debate, but in my opinion, it\’s an interesting experience that has yet to be duplicated. So far, 25,000 guests have experienced the experience -for free.

Rethinking Retail Space

A cross between art installation, immersive theater and DTC shopping, Showfields is staffed with very hip and helpful brand hosts who entertain you and give you the backstories on all the featured products in this creatively designed retail experience. The millennial brand ambassadors, outfitted in trendy white coveralls, are well-informed salespeople with narratives about what brands are selling — from nextgen skincare and the revitalization of the Book of the Month Club to pet care and minimalist handbags. The product mix changes every six months and the entire staff is retrained and re-informed on the sales stories.

You start on the third floor and travel though Treasures of New York with a resale collection of Chanel, Prada, Louis Vuitton, Fendi and all their luxury brothers and sisters. Your next, must-have $1365 Chanel bag can be purchased from your phone by clicking on the QVC code. And that goes for most of the other merchandise displayed in vignette pop-up spaces that are tucked away in the three floors of highly visual showcases for up-and-coming brands selling their millennial-chic merchandise.

The selling spaces are a mix of pop-ups; each has a unique environment and sometimes it\’s hard to tell a retail space from an art installation, which is exactly what Showfields is going for. Partner (vendors) costs range from $6K-$20K per month depending on a variety of factors including design and staffing. Brands keep 100 percent of their sales. Showfields says they are always committed to \”bringing new and exciting products into the space inviting up-and-coming and need to know brands, through an application process through their website link or direct invitation.\” It seems to be an effective way to sell cool stuff. According to Showfields, brands saw four times as many sales onsite during opening weekend in late July compared to weekends prior. The rest of the store saw a 33 percent increase in traffic during opening weekend. And since the launch in December 2018, the store has seen a 50 percent increase in sales.

Storytelling

The trip from the third floor to the second is not for the fainthearted; behind the hidden library door, the spiraling metal slide whooshes you down as though you were in a waterpark, sans water. Everyone – of any age — arrives with a surprised whoop, literally dumping you into an artful installation.

The second floor is billed as The House of Showfield, with their interpretation of interactive living spaces; bedrooms, kitchen and bathroom. This is where the actors perform as part of an ongoing story. Two young women said they are sleeping over at Showfields for several months. One in their new hotel suite model, Ethos. According to Showfields, \”Ethos is a one of a kind hotel, fostering collaboration and interaction among like-minded individuals.\” The other young lady is sleeping in between scouting trips to Dubai, London and Tokyo. Personally, I would sleep no more if I were spending the night in this huge theme-park space, which transforms to creepy in the dark. But it\’s all part of the script.

The Lab located on the second floor is a clean, streamlined shop where you can buy selected items, all purchased wirelessly. The fourth floor is a shared workspace with a crop of millennials working together silently on laptops at the long trestle table. It\’s equipped with a beautiful de rigueur kitchen and snacks. And Showfields is multidimensional, offering innovative evening events to ensure loyal customers return for more immersion.

Experiential Marketing

Everyone talks about creating a memorable retail experience. Where do we look for experiential originality and innovation? Hospitality and theater seem to be the leaders today. The Four Seasons Resorts are poster children for delivering a unique experience, each with a different architectural design, all over the world. Disney is the grand dame of hospitality and theater, raking in $4.5 billion (theme parks and resorts) in 2018 from families and people looking for a diversion, clean old-fashioned fun and a nostalgic story.

Does Showfields work? The 14,000 square-foot Showfields is the vision of Tal Zvi Nathanel, who raised $9 million in initial seed funding. Based on the discovery experience of the bazaar, Showfields is successful in providing surprise and delight, unexpected new ideas and an appealing curated collection of young brands. It takes a page out of Sleep No More by creating a series of narratives, with actors who carry on with their performances while we gingerly wander around exploring the place. It also borrows from Meow Wolf with digital and physical art installations (not nearly as wacky as M/W) giving the space an animated dynamism. According to Tal, \”Retail is in a state today where it\’s constantly evolving. We\’re in a landscape where new brands are constantly being created, but traditional stores typically only give consumers access to brands they\’re already familiar with, in the same store format they\’re used to. Younger customers are tired of the traditional store. They\’re looking to discover brands that are fresh and new – not the brands that are shown at department stores all over the country.\”

He adds, \”We keep Showfields fresh by hosting the most interesting brands, products, and experiences in the world. By working with the most exciting digitally native brands that are emerging into the scene on a regularly rotating basis, we\’ve made a commitment to bringing new, exciting, and forever evolving experiences to our customers.\”

When asked, next-gen attention spans are pretty short; how can you reinvent the experience sustainably? Zal explains, \”The line between online and offline experiences has become increasingly blurred. As daily life increases its demand in technology, we\’ve come to expect physical experiences that transcend our online interactions. Future success in the experience economy relies on brick-and-mortar\’s ability to create multisensory connections with the seamless comfort of digital life. This generation does not settle for being mere observers of experience. By interacting with art beyond the visual sense, we become active participants in culture and community. House of Showfields is taking you on an immersive theatre experience that bridges art and retail. Audiences will be incentivized to participate in the environment\’s magic realism and purposeful ambiguity. You are allowed to touch, smell, eat and test all products and artwork on-site. House of Showfields breaks the traditional \”look-don\’t-touch\” boundaries in both art and retail by inviting the audience to interact with the products and artworks throughout the experience.\”

If you know why you are going to Showfields, it\’s going to be very successful. The bevy of female customers who were touring the installations when I was there were mostly confused. They didn\’t know if it was a store, an experience, an art installation – a folly? They are not the target customer, but were genuinely supportive of the actors and hosts.

So, it may be a novel way to showcase new brands for younger customers who are looking for diversion. Having the appealing staff on hand to authentically engage you is a legitimate plus. But does it spur sustainable spontaneous purchase? Maybe. Everything is available online, so it\’s definitely an effective showcase with on-point sales experts who all look like they are having a great time. I will say one thing: It\’s a hell of a lot more of a provocative experience than going to a run-of-the-mill traditional legacy store. For the curious and acquisition-minded, it\’s worth repeat visits to see what\’s next and what the cool-factor brand hosts and actors have to tell you.

Three clicks on your mobile device or laptop will deliver (most often for free) whatever you want the same day, or in a day or two, wherever you want it sent or to be picked up in a place near you. And the order can be placed wherever you are – in your bedroom, bath or living room, on the beach or on a boat. There is no store or place that you must travel to. All stores and marketplaces, worldwide, are packed into the devices just in front of you.

Blah, blah, blah … nothing new here. But here\’s some interesting context: What if you want to go to a physical place to browse around, hunt for something new, touch and feel stuff, smell food cooking, hear some music, watch streaming videos or to enjoy an experience of any kind that can\’t be had on your device?
While these real-world experiences cannot be appreciated online, young consumers (the only ones who really matter, as their elders fade away) now demand both the sensate experiences offline, as well as a similar level of convenience that they get online. So, if the online journey is satisfied with the convenience of a few clicks, how will the brick-and-mortar guys satisfy the convenience demand, to say nothing of delivering an exciting outing for young people?

Welcome to the Neighborhood

Hey! An easy answer. Bring it to the \”hood.\” Yes, build out small neighborhood stores and/or pop-ups, and/or shared available local spaces. And this is exactly what some of the giant players are doing, with others still in test mode. By the way, this strategy is not just about shrinking the size of existing stores.

It\’s about finding neighborhoods heavily populated with the brand\’s core and/or targeted consumers. This is how Target\’s small store expansion onto college campuses and into urban neighborhoods fulfills the convenience demands of the next gens. Furthermore, through AI and data mining, a neighborhood retailer can maximize productivity by assorting the smaller space precisely with locally preferred goods. Target has about 100 of these stores which are about a third of the size of their large formats. And they are planning on opening about 30 per year over the next few years.

Macy\’s and Kohl\’s are testing smaller neighborhood formats in which they would localize their assortments but would also fill freed-up space with other products and/or services. Macy\’s is imagining expanding its Starbuck\’s locations, adding other food and beverage services. It is also expanding its highly successful Back Stage off-price model, creating mini-fulfilment centers and even partnering with other retailers and brands, similar to its current The Market@Macy\’s, as well as continuing to evolve its recently launched STORY concept, which is just the beginning of creating additional STORY-like concepts.

Kohl\’s is also reformatting their model into smaller neighborhood stores; think eventually branded specialty stores. It should be noted that Kohl\’s original strategy in the early 1990s was placing their stores in \”working-mom\” neighborhoods, targeted to women who did not have the time to go to and shop through the malls 20 miles away. They are also shrinking unnecessary space for current assortments and have partnered with Amazon, Weight Watchers, Planet Fitness and are testing with Aldi grocers. They too will be localizing assortments and quick in-and-out concepts, such as self-checkout kiosks.

Nordstrom is expanding its unique neighborhood concept called Nordstrom Local. It\’s a visionary move, responding to a demanding youth culture. Boldly innovative and counter-intuitive, there is no merchandise in-store. It is a small (3000 square-feet), fun, personalized experience. It\’s a quick-and-easy neighborhood destination where you can enjoy a full beverage menu including California-sourced beer and wine, cold-pressed juices from Pressed Juicery and crafted espresso drinks from Nordstrom\’s Ebar.

Oh, yes, you can also get a manicure.

While enjoying a beverage, customers can lounge comfortably in a meeting space where they can chat with their Personal Stylist experts, who, equipped with digital \”Style Boards,\” can create personalized fashion recommendations, which shoppers can view on their phones and purchase directly through Nordstrom.com. Alternatively, the Stylist can find the items in other local Nordstrom stores and have them delivered to the customer\’s home on the same day – if ordered before 2:00 PM. The Personal Stylists can also interact with the customer, wherever they may be, and provide fashion advice through a Nordstrom Local app. A Nordstrom Personal Stylist can help customers with everything from fashion advice and a whole new wardrobe, to finding the perfect gift for any budget. Customers can make an appointment with a Stylist online, over the phone or in person. The Local is designed to be a fast, fun, zero-pressure and frictionless experience. If the customer pre-orders online, they can either pick-up curbside or come into the store and try on the items in one of the eight dressing rooms surrounding the styling suite. If in need of alterations, a tailor is on hand.

Finally, a new neighborhood startup concept, Neighborhood Goods, just won the \”Best Alternative to a Department Store\” in Dallas\’ D Magazine\’s Best of Big D 2019 Issue. Having launched in Dallas, they are planning to open in New York this year. While some are calling it the \”department store of the future,\” I would not make that leap. In fact, there are aspects of the model that resemble Macy\’s STORY concept and/or Market@Macy\’s, and its rotating themes and brands, many of them born on the internet. In fact, Neighborhood Goods describes itself online as \”featuring an ever-changing landscape of brands, products, and stories.\”

It launched in 2018 with its own bar and restaurant called Prim & Proper and over 30 brands including Stadium Goods, Buck Mason, MeUndies, Hubble, Primary, and more. And tennis superstar Serena Williams launched her new apparel line there. At about 14,000 square-feet, they also have a communal space for holding events. They have also partnered with Walmart\’s direct-to-consumer mattress brand Allswell, actress Reese Witherspoon\’s clothing line Draper James, and men\’s and women\’s wellness brands Hims and Hers and sneaker marketplace Stadium Goods.

What About Amazon?

Let\’s not forget Amazon. We know Jeff Bezos is a brilliant visionary who has built a quintessential, arguably unstoppable worldwide marketplace, a platform upon which anything or any service can operate – millions of products and brands, services, entertainment, media, other retailers and on and on. However, when it comes to acquiring or building out in the physical world of retailing, Amazon is struggling. Whole Foods is turning out to be a work in progress with no clear strategy, and it will never come close to Walmart\’s grocery dominance. Amazon Go is not going. Consumers don\’t like the experience and a 7-Eleven is less costly to operate than the heavily tech-infused, data mining machine that is more of a technology project than a better way to serve the consumer.

Amazon bookstores are…well, boring? And Amazon 4-Star is a nothing burger full of a bunch of disparate, puzzling stuff. A pillow next to a screw driver??!! Give me a break.

Maybe, Amazon is struggling to enter the physical world of retailing because Jeff Bezos doesn\’t have a physical retailing bone in his body, which I have accused other retail CEOs of, and who will go un-named here.

And just maybe, these small neighborhood store strategies will be another huge competitive advantage for the iconic giants and small specialty and/or startup concepts. One last note. By physically placing themselves within minutes of the consumer, they gain cost efficiencies and advantage over Amazon in \”the last mile\” distribution conundrum.

I\’ve called this the \”Distribution Century.\” And so it is.

Wow! Another huge disruption coming out of McMillon\’s Walmart. They seem to have one speed only: meteoric. One could say I spend too much time covering their warp speed, almost-daily initiatives. But, how can I not? As the largest retailer in the world, that could have been stuck in the old world under the sheer weight of its size and arguably antiquated culture, it found a rocket ship commander in CEO Doug McMillon who is blasting through old paradigms and not waiting for anybody. Message to employees: put your jet packs on and hope you can follow this guy or find another job. Disruption ain\’t for the faint of heart. And McMillon is turning out to be the disruptor in chief, turning the lumbering behemoth into an agile, innovative startup.

Walmart\’s latest announcement was made at a recent ICSC event in Atlanta. They are reimagining their enormous supercenters along with the land and parking lots surrounding them. Walmart describes its vision as a Town Center concept. They are planning to lease the underutilized space to gyms, farmers markets, food halls, in-house and free-standing restaurants like Shake Shack, Caribou Coffee, Orangetheory Fitness, skateboard parks, ice rinks, dog parks, movie theatres, bowling alleys and a myriad of other entertainment and recreational facilities.
Not every location will include all of these. And each location will be unique, developed in partnership with the communities in which they are located, with a sensitivity to the lifestyle desires of each community.

Am I Talking About Walmart? Wow!

Speaking at the ICSC event, Walmart\’s VP of U.S. Realty Operations, LB Johnson said, \”A transformation is underway.\” That\’s an understatement LB. He continued, \”We are working with the local community to really master plan a vision, not only for Walmart, but shared with the municipality.\”

I beat the personalization (including localization) strategy to death whenever I can. This is just another enormous example. Walmart is building local lifestyle Town Centers as compelling go-to places where consumers, particularly the emerging Gen Z cohort, will want to spend some time hanging out.

Currently they are planning for more than a dozen Town Center concepts across the U.S. in Washington, Missouri, California, Texas and Arkansas, among other states. They intend to develop their first supercenter Town Center next spring in Longmont, Colorado, which includes 12 acres of adjacent vacant land around the supercenter as well as six to eight acres of underutilized parking space.

Beginning of the End of the Word, \”Store\”

Stores are for storing stuff, as we commented in our co-authored book, Retails Seismic Shift. And as I have repeated in so many presentations over the past couple years, and often included in The Robin Report, the industry\’s leaders need to delete two words from their vocabularies: \”retail store.\” When those words are spoken or written, the automatic mental visual is of a big building full of stuff. This is the biggest barrier to change. Apple SVP, Angela Ahrendts, redefined Apple stores as Town Squares. She drives that vision 24/7 in communications and reality by creating customized Town Squares as community gathering places with unique appeal to consumers in each of Apple\’s locations.

Envisioning your brand and your locations as assets that can be redefined and redesigned in the community as social and entertaining gathering places (not \”retail stores\”) is a powerful strategy. And at the risk of creating an oxymoron by comparing Walmart\’s reimagined retail stores as Town Centers, with Apple\’s Town Squares…I just did.

Walmart\’s LB Johnson said, \”We want to provide community space, areas for the community to dwell – a farmers market, an Easter egg hunt, trick or treating. We want to provide pedestrian connectivity from our box to the experiential zones that are planned on our footprint. We want to augment these experiences and activities with more food and beverage, with health and fitness, essential services and entertainment.\”

This major strategic move in the physical world also mirrors their acquisition of Jet.com and building out a long tail of cool tech-driven brands. Both initiatives are intended to compel younger, more affluent consumers. Walmart didn\’t invent the necessity of this strategic vision and they are not the first to attempt its implementation. However, they are the biggest, and may very well spur an acceleration among the other major players who are defining their own strategies for building experiential communities: Macy\’s, Kohl\’s, Target and Nordstrom, among others. And old -world mall and shopping center developers/owners should take note.

There was also a guy named Ron Johnson who had this same kind of town center concept for JC Penney several years ago. I believed in his vision. He was just unable to pull it off. But the legacy of his prophetic vision lives on.

I believe McMillon can and will pull it off.

People are born curious. It\’s in our DNA. Actually, there is a curiosity gene. Researchers postulate that humans are driven to explore new things and pursue new experiences because it floods our brains with dopamine, the pleasure hormone. Curiosity is a lot like sex; curiosity activated and satisfied is its own pleasurable reward that reinforces the desire to get that pleasure kick again.

So, it was curiosity that sent me to Anthropologie\’s Devon Yard \”lifestyle center\” when I read about its opening. Located on Philadelphia\’s Main Line, not far from where the first Anthropologie store opened in Wayne in 1992, my dopamine receptors were appropriately activated. I came away pleasurably satisfied and eager to visit often to enjoy the experience.

Setting the Table

Devon Yard was built on a six-acre site right next door to the historic Devon Horse Show and County Fair, in constant use since 1896. After the Waterloo Gardens center closed, Urban Outfitters Inc. bought the location and brought it back to life retaining its outdoor-living focus in terrain, Urban\’s garden and outdoor lifestyle brand. The Devon Yard courtyard is a full-service nursery and garden center selling plants and offering custom plantings and floral designs. Visitors can enjoy the greenery before they even get inside the main Anthropologie store.

Flanking the courtyard is a Terrain Gardens event space that can accommodate 190 guests with in-house catering and beverage service. Hosting weddings is the natural target for the Terrain Gardens service, with Urban\’s BHLDN Weddings boutique also on site providing bridal parties with wedding gowns, shoes, accessories, stylist services and everything else needed to support that special day. And terrain can provide the flowers too.

Devon Yards\’ regular guests have two dining choices: Urban\’s own Terrain Café with a farm-to-table vibe and its fine-dining Amis Trattoria for Italian fare under the direction of Philadelphia\’s acclaimed chef, Brad Spence. On my lunchtime visit, Amis Trattoria wasn\’t open yet and Terrain Café was packed. An hour-and-a-half wait time wasn\’t in my plans that day, but after reviving with a glass of wine at the bar, I was ready to venture into the Anthropologie store.

Anthropologie Is Looking Good

In my travels I have visited many Anthropologie stores and have been a fan. But Devon Yard takes Anthropologie to a whole new level, literally, as it has two selling floors. Anthropologie is one of the few retailers that knows how to merchandise and sell fashion and fashionable home accessories.

In Devon Yard it goes even further to showcase a whole range of furniture and furnishings in a cohesive lifestyle setting. Custom home design services are prominently on display, along with various vignette groupings that feature the furniture and furnishings in room settings. The furniture and home décor accents felt right at home with the women\’s fashion that you expect from Anthropologie.

It also has elevated its beauty offerings from the expected bath and body, skin care and cosmetics into a wellness concept. This follows the path it first introduced in Palo Alto, California earlier this year when it added a Wellness by Anthropologie shop in its flagship store. The wellness shop features what the company describes as \”ethical and conscious\” products, including aromatherapy and essential oils, yoga mats, teas and elixirs, snack bags, supplements, and new-age crystal products like face rollers, water bottles, combs and toothbrushes. Some 12 Anthropologie stores already have Wellness by Anthropologie shops, and more are planned for this fall.

The Anthropologie Vision

Speaking to the new vision for Urban Outfitters and its Anthropologie, Terrain and other brands as expressed in Devon Yard, Andrew Carnie, president of home, garden and international Anthropologie Group, said in the latest earnings call, \”Dick\’s [Urban\’s CEO Richard Hayne] original vision for Anthropologie was a complete lifestyle based around our customers\’ life, how she dresses, how she decorates her home and how she lives her life.\”

Regarding home, the Devon Yards store goes much deeper into the category than it has done previously in brick-and-mortar retail. Up until Devon Yard, Anthropologie\’s home business was primarily digital, with \”over 60 percent of our sales penetrated online,\” Carnie said. \”To be honest, we have only scratched the surface in the home business in North America.\”

Both Hayne and Carnie say Devon Yard is only the beginning. \”It is a wonderful prototype that we would love to see in other places as well,\” said Hayne. And Carnie added \”There is a lot more to come in this space. It\’s great that the home business and wellness and accessories and Anthropologie always look cohesive both online and [in] stores.\”

Devon Yards Checks All the Boxes

In my book, Shops that POP!, I outline seven strategies that retailers must use to achieve extraordinary retail success today, what I call the POP! equation. Devon Yard checks all those boxes:

• Customer involvement – Anthropologie guests are greeted at the door and invited in to explore.
• Evokes curiosity – Devon Yard has that one nailed. Who isn\’t made curious by what looks like a garden center that sells clothes and furniture and offers drinks, food and fine dining?
• Contagious, electric quality – The attraction to explore and discover is contagious at Devon Yard. All the people in the center, both the staff and the guests, are happy and excited to be there.
• Convergence in atmosphere, design, merchandise – Every detail at Devon Yard is carefully thought out, from full-sized horse sculpture at the door to the Pennsylvania field stone and reclaimed barnwood throughout.
• Authentic concept – Devon Yard expands Anthropologie from a women\’s clothing store with home décor accents added in into a true lifestyle expression of the Anthropologie brand.
• Priced right – The value of the shopping experience justifies the prices on the labels here.
• Accessible & free from pretentions – Devon Yard is the realization of a luxurious horse-country lifestyle, but with a little something that invites everyone without a horse-country budget to enjoy and participate.

Retailers have learned that it is not enough to simply open a store and expect people to shop. They have to offer something more than new products to entice shoppers in. It is as Ken Nisch, chairman of retail design firm JGA says, \”Retailers have to give people something to do, then they will shop. But shopping can\’t be the thing to do.\” Urban Outfitter\’s Devon Yard gives them that something to do.

I have often said and written that the traditional retail sector has a huge untapped advantage over e-commerce. They can they create a compelling “Starbuckean third place,” full of experiences that cannot be created online. Additionally, they have the potential of creating an authentic human connection through their employees. In my opinion, these frontliners can be the most important link in the physical world value chain — the link that touches the consumer, and potentially creates a loyal bond. In fact, I have often suggested that there should be some kind of a curriculum that earns an MBA degree (a Masters in Brand Ambassadorship). In my opinion, this is not an exaggeration. We need well-trained talent as the point of contact with customers.

Macy’s has leapfrogged my suggestion and is taking the human bonding concept to another level. Macy’s created the Style Crew program, which is taking control of its own influencer network by recruiting its store sales associates and personal stylists as brand ambassadors, rather than enlisting the latest hotshot bloggers. These grassroots influencers create videos of themselves involved in activities using Macy’s products, then sharing the videos with their social networks.

How brilliant is that?

During our Retail Radicals event on Tuesday, June 5th, co-hosted with the Fashion Group International, Macy’s EVP of Business Development and innovator of the Influencer concept, Marc Mastronardi, said, “it’s easier to leverage assets that exist than creating something from nothing.” He talked about unlocking the creativity and talent of Macy’s 130,000 sales associates and stylists to build a branded Macy’s experience that is personal and authentic.

Macy’s is taking its products to wherever their customers may be, and doing it in a deeply personalized way. Their employees reach out to their friends in a fun entertaining way through their videos, and Style Crew is original out-of-the-box radical thinking. Marc and his team of innovators created this initiative through a strategic thought process. He and his entrepreneurial team will hatch many other breakthrough innovations focused on this holistic view of the customer. The Macy’s brand (and all of its products and experiences) has the mandate to be where the consumer wants to be engaged. He said, “Where do consumers hang out? Can Macy’s own brand be there? If yes, how do you monetize that? How can I create value and how do I bring together who I need to get to where the consumer is spending their time, energy and money?”

More Authentic Than Hotshot Bloggers

The Style Crew has a concrete goal of driving conversions. For example, one influencer video has an employee leading a bartending tutorial that links to actual glassware and other cocktail accessories at Macys.com. Another one has an associate hiking in Los Angeles, and it features performance athletic apparel and footwear. Marc says it’s working, driving both in-store traffic and conversions.

This outreach of Macy’s credible brand ambassadors out bests the increasing number of popular influencer and blogger media stars. First of all, it’s authentic; there are many fake influencers, claiming to be famous who often state a fake number of followers. Secondly this third-party influencer media platform is getting costlier. Macy’s ambassadors are compensated by sharing a portion of the profits, just as the stylists receive a commission in the physical stores. And finally, while the professional influencers are constantly seeking new followers, Macy’s ambassadors already have a network of personal friends that they can easily and quickly expand through by word of mouth and their personal influence.
Outdoing the Macy’s Parade?

Another panelist at our Retail Radicals event, Mark Bozek, CEO and founder of Live Rocket, a company that merges art and commerce, shouted out, “This is the best idea coming out of Macy’s since the Macy’s Parade.”

We shall see how it plays out. But, I believe we are going to see a growing number of radical ideas coming out of Mastronardi’s team.

Marc is a poster child for our new Radicals Awards, created to recognize and reward the innovative change agents working in traditional brands and retail. Nominate yourself and encourage all the Radicals you know to apply for the awards. It’s quick simple and there’s no fee!

Did Marvin Ellison leave JCP to become CEO of Lowe’s, fleeing the emergency room sensing Penney’s impending death, or did he take flight to a new and more fitting opportunity? His prior 12 years at Home Depot ended as EVP of Stores after he lost the race to the top to its current CEO Craig Menear. His move to Lowe’s might have been sparked by a competitive nerve, if not one of revenge.

Regardless, his opportunity is much broader at Lowe’s with a greater growth potential in a fairly healthy industry. Lowe’s is nearly six times the size of Penney in annual revenues, with a relatively low debt load. Furthermore, Ellison’s long tenure in the home improvement space, and particularly his experience as head of Home Depot stores can strengthen one of Lowe’s weak spots (customer service). Out of the gate he has some “low hanging fruit” for early improvements including ecommerce, which he boosted at HD.

In fact, based on the success Ellison had at HD, William Ackman’s Pershing Square Capital Management LP has built up a stake in Lowe’s of roughly $1 billion. Whoa!! Isn’t this the same guy who got Ron Johnson hired at JC Penney in 201l? The very same Ron Johnson whose vision I believe was correct to this day, but whose execution drove the company into a ditch (which some experts believe is unrecoverable)? Ackman lost billions on that bet. Is his support of Ellison an ominous “finger of fate,” suggesting this bet may signal disaster?

I don’t think so. Marvin Ellison is heading into a much more comfortable and familiar space where the likelihood of success is more easily achievable. But what about the fate of the ER patient he is leaving behind?

JC Penney’s Declining Decade

Following many years of acquiring businesses unrelated to the primarily apparel and soft lines-based retail business, JC Penney’s retail business started to decline by the mid-to-late-90’s, even while its drugstore chain, insurance, and banking services divisions were growing.

At the same time, I observed and wrote about the fact that during the 90s Kohl’s was directly competing with Penney for the business of 35-55-year-old working moms who did not have the time to drive to, and shop through the malls where JC Penney was anchored. Therefore, Kohl’s rapidly built out their fleet of freestanding stores in the neighborhoods where the working moms lived. The stores were also single-floor, with central checkout and big parking lots. Because of the advantage of convenience and ease that Kohl’s offered these time-starved moms, by some estimates they stole $5 billion in revenues from JC Penney during that decade.

In the fiscal year ending in January 2000, while JCP overall net sales increased 6.7 percent to $31.74 billion, the retail store sales actually fell 8 percent. The sales increase was wholly attributed to the Eckerd drugstore chain, which saw its sales increase 20 percent (at the time, Eckerd sales comprised nearly 40 percent of overall JCPenney sales). The proverbial tail was wagging the dog.

It became obvious to the JC Penney board that they needed a turnaround leader, and fast. In September 2000, Allen Questrom became the first CEO hired outside the company. His reputation as a turnaround artist preceded him, having previously led both Federated Department Stores, Inc. and Barneys New York Inc. out of bankruptcy. Over a four-year period, Questrom stabilized the business and launched some major initiatives: the centralization of merchandising, implementation of a national advertising campaign, and the renovation and modernization of the stores. He also got rid of all non-core businesses, including the Eckerd drugstore chain.

In 2004, with sales of about $18 billion, he passed the baton, then on a growth trajectory, to incoming CEO Mike Ullman. Ullman kept the business momentum forward to about $20 billion by 2007. But then in 2008, the decline in revenues and gross margin began and continued over the next three years as the economy crashed into the Great Recession. By the end of 2011, revenues had dropped to about $17.5 billion.

According to Mark Cohen, professor at Columbia Business School, “Ullman was able to prop up the bottom line with expense cuts (the catalog business was a casualty with no offsetting and meaningful investment in e-commerce).” Cohen also said, “Under Ullman JCP’s promotional balance of sale (percent on sale vs. regular price) went from something like 60 percent when he took over to nearly 100 percent.” The company’s profitability began a slow and steady decline. This took the stock price down from Questrom’s high in the mid to high $50 range to the mid $20’s.

It was during this period that historical and seismic decisions were made, indelibly and disastrously altering JC Penney’s business. Today, some experts believe the moves proved fatal and irreversible and it’s just a question of time before JC Penney will fail.

According to Cohen, the drop in the stock price in 2011 “opened the door to the two activists, William Ackman and Stephen Roth who essentially bought 29 percent of the company’s stock and co-opted the company’s board in doing so.”

On the plus side, during Ullman’s tenure he did bring Sephora into the stores. To this day they are the most productive business across all of Penney’s categories and are being expanded throughout the chain.

And Then Came Ron Johnson

By the end of 2011, with revenues and profits still declining and the activists essentially in control of the board, some sources say that Ullman reached out to Ron Johnson, who spearheaded Apple\’s much-lauded retail business. Ullman would retain his CEO title but would eventually pass the baton to Johnson, or something like that. The reason I say “something like that” is because there are conflicting stories about how the Johnson hire happened. But regardless of the hiring process, Ackman and Roth were in the power seats and forced Ullman’s ouster and Johnson’s appointment as JC Penney’s new CEO.

On January 25, 2012, Ron Johnson presented his grand vision in front of some 700 VIPs in New York on a big stage. He explained how he was going to fundamentally transform JC Penney, both strategically and structurally. Essentially, he would immediately (without testing) wipe out price promoting across the board, eschew their highly effective private branding program for cool new brands, building streets of shops and a town square where young people could gather for events, and on and on. With his out of the gate elimination of price promoting, he essentially “fired” his core 35-55 year-old customers. On cue, they abruptly left, and the cool-factor nextgen consumers never replaced them.

Annual revenues were about $17.5 billion when Johnson took over in 2012, and crashed to about $11 billion when he was ousted in 2014. The company posted net losses of $795 million in 2012, $1.2 billion in 2013 and $717 million in 2014. Comparable sales in 2012 fell a harrowing 25 percent. The next year, the company added more than $2.5 billion in debt to its books.

If you are interested in reading the details of his 2012 on stage presentation, his vision and strategies, click here>>. You will see that I drank the Kool-Aid. But as I have said, I agreed with his vision of what the modern-day department store should be today. His implementation of the vision was simply horrific. And that’s an understatement.

Off Again, on Again Ullman

On the brink of death and with the organization in total disarray, Penney’s board decided they needed Mike Ullman to come back to stop the bleeding and bring a level of confidence back to the organization. Ullman did stabilize the business again and eked out another $1.5 billion in revenues, from $11 billion to about $12.5 billion. Then he brought Marvin Ellison in as CEO in 2015. Supposedly, now that Ullman stabilized the ship, Ellison would put it back on a growth trajectory.

Ellison From Take Off to Get Out

Ellison arrived with hope, determination, great leadership skills and three major strategies for “take off” to growth. He would focus on the private branding capabilities that Johnson had decimated. Providing differentiation and higher margins, he brought the margin of their overall apparel business back to around 50 percent. The second priority was to get the JC Penney omnichannel model up to a competitive level. And third, he would focus on increasing traffic and the average spend.

At the end of his first year, Ellison delivered. Revenues increased 3 percent to $12.6 billion. And he was on record stating they would reach net sales of $14.5 billion by 2017, Ellison’s third turnaround year. The $2 billion of new revenues would include $750 million in the resurgence of the home category, which had the largest decline in market share in sales per square-foot and jcp.com sales during the Johnson era.

Gross margin increased 120 basis points to 36.0 percent from 34.8 percent in 2014, while SG&A decreased $218 million or 270 basis points over the prior year. Ellison declared “low cost retail wins” at a Goldman Sachs retail conference in September 2017. He talked about driving supply chain efficiencies by investing in the “science” of retailing, creating a more efficient and effective supply chain, using analytics for sharper pricing strategies, lowering advertising costs and focusing on deeper penetration, and reducing the bureaucracy. However, his focus on cost reductions was a “reduce to reinvest” strategy to increase investment in marketing, omnichannel and technology for growth. Ellison’s plan was strengthened by his deep experience in all of these tactics from his tenure at Home Depot.

Adjusted EBITDA was $715 million, a $435 million or 155 percent improvement from 2014, and it beat the forecast of $620 million. A key driver of the positive sales results for 2015 was the 4.5 percent increase in comp store sales — a significant achievement.

For 2016, Penney upped its adjusted earnings forecast to $1 billion vs. its prior forecast of $900 million. And its three-year turnaround goal for 2017 was to reach $1.2 billion in EBITDA, which would enable Penney to service its debt, at about $4.5 billion, and pay for expenses. Another source of debt reduction could come from the possible sale/leaseback of its Plano headquarters.

Its adjusted net loss for 2015 improved by $463 million to $315 million, or $(1.03) per share. Free cash flow was positive at $131 million, an increase of over $74 million or 130 percent from 2014. For the full year, liquidity improved $900 million, of which $500 million was used to pay down debt during the fourth quarter. At year-end, liquidity was $2.5 billion compared to $2.1 billion last year.

For more detail on Ellison’s first-year performance and strategic plan, click here>>. So, what happened? They made a slight profit in 2016, but it was followed by a loss of $116 million in 2017. In 2016, Ellison barely moved revenues and in 2017, rather than the $14 billion in revenues he projected for 2017, they were stalled at $12.5 or $100 million less than when he arrived. Penney did post positive comp store sales in 2017, increased adjusted earnings per share by 175 percent, and reduced outstanding debt by $600 million.

However, overall, the business just slogging along, certainly not at wings up speed enough for take off. Then in 2018, Penney\’s first-quarter numbers were worse. Revenues declined, comps didn’t move and they had a loss $78 million. Wow, what happened here? The ghost of Ron Johnson or something more intractable?

The Beat Goes On

With enormous cost cuttings, store closings, some debt reduction, and positive moves to expand Sephora, (which is the most productive category in the fleet), a determined effort to bring their once highly successful (a long, long time ago) home category back (including appliances and Ashely furniture, Empire floor coverings, etc.) and even with great strides in their omnichannel efforts, the growth needle is just not moving, at least relative to their competitors — excluding Sears, which hasn’t enjoyed the growth needle for a couple of decades.

All of which brings us back to the opening question: Did Marvin Ellison flee the emergency room sensing Penney’s impending death, or did he take flight to a new and more fitting opportunity, as he leaves to become CEO of Lowe’s?

The truth is, it doesn’t matter. What does matter is that JC Penney is critically wounded once again. And in this chaotic, fast moving, hyper-technological and hyper-competitive world, with a new consumer culture that just turns their backs on anything that isn’t new, modern and cool, JC Penney is stuck in the ER. If a brilliant surgeon is not found, and found quickly, we might be witnessing the demise of another iconic American brand.

NRF President and CEO Matthew Shay recently published an article on LinkedIn entitled, The 3 Worst Articles on the Retail Apocalypse – And Why They’re Wrong. While I run the risk of biblical-sized smiting from the gods of the retail establishment, I cannot hold my tongue on this one. Shay’s post could not be more tone-deaf. His article strikes the exact wrong tone at the exact time we need him most. Consider this your wake-up call, Matthew Shay and NRF. That sound you hear? It’s your iPhone ringing at the side of your bed telling you it is time to start leading differently.

Shay’s Position

Read Shay’s piece for yourself. You decide. Am I just prone to hyperbole? Or, is it right to expect more of our leaders?

Shay’s position in the piece is simple. First, he argues that the “Retail Apocalypse” is overstated, that retail is thriving and coming off its best holiday in years, and that people writing “false narratives” need to be better informed. Second, he then singles out his three biggest “offenders” and the writers of such narratives from the past year and discusses, tritely, where they “went wrong.”

In order: Shay first blasts The Atlantic for saying online shopping and the rise of Amazon could be bad for retail because, to him, online retail is retail. Then Shay says that Business Insider’s claim that a large proportion of American malls and mall anchor tenants are in a tough spot is invalid because a published report by IHL claims retailers actually opened more stores than they closed in 2017. And finally, he singles out Bloomberg, saying their evaluation of retail debt levels and the potential impact of retail bankruptcies on American jobs is unwarranted because of his tangential assertion that the Bureau of Labor Statistics “only counts in-store positions as retail.”

Talk about a classic case of misdirection. You might even cite this as fake facts: deflecting attention to things that are true but, when one digs deeper, really have nothing to do with the actual points being made. It may be a great PR strategy, but just saying someone is wrong does not make a person right either.

That’s flawed logic.

Missing the Nuance

The problem with Shay’s arguments, aside from engaging in his passive-aggressive discussion on LinkedIn, is that he is missing the nuance of what people are trying to tell him – hell, even what I tried to relay in my NRF 2018 recap this past January – namely, that change is coming and that NRF, as our national organization, needs to work with the change and not against it.

Shay is right that retail is not in an apocalypse. The apocalypse metaphor has been sensationally overused. I even went on record at the recent CUE4 conference in Minneapolis, saying we are in more of a reformation than an apocalypse. Our new age consumers are playing the role of Martin Luther, nailing their collective 95 theses on the doors of our hallowed retail institutions.

While retail is healthy and thriving at the top level, there are some real structural issues hidden below the surface that our retail leaders need to address, making today’s argument an argument about leadership, not about who is right or wrong. Leadership requires seeing the nuances. In my opinion, Shay’s piece is short on nuance and long on “fake news.” As I said, this is a leadership issue.

The Unfiltered Facts

I go so far as to call Shay’s piece “fake news,” partly because the retail apocalypse has become a cliché and also because, at the end of the day, none of his points really make a difference in helping those in the industry find solace and comfort in what lies ahead. We need Shay to lead into the future.

I don’t have all the answers either. The immediate situation we face is tough. I suggest it is not going to be solved by saying who is right or wrong. We need dialogue. So, I am not going to spout statistics, cite research reports, etc. that can be used and manipulated in various directions. Instead, I am going to highlight key conceptual truths. These truths are leading indicators that alert us to the likely disruptive change, that is coming our industry’s way.

1. E-commerce continues to steal share
2. Stores are closing and retailers are trying to get smaller (using total store openings and closures as a mark of “health” is fallacious)
3. Further technological innovations – namely visual search, chat bots, voice activation, augmented reality, and process automation – are already here
4. Alibaba looms large

This is not a time to bury our heads in the sand, however tempting that may be.

Scenario play with me then for a moment. Play out these truths. What do they mean and what could be the results?

• First, if e-commerce continues to steal share – then worse case it likely will mean fewer overall retail jobs (however, you want to classify them) and best case, it will mean jobs in different locales from where brick-and-mortar installations exist today.
• Second, if retailers are getting smaller (even if total store counts remain neutral) chances are those stores will still employ fewer people.
• Third, if technological innovation continues at its fast pace – then each of the above-mentioned technologies will mean less need for people and less need for storefronts.
• Fourth, if China’s retail technology backbone is thriving – then why should retail be any different from any other industries that have gone before it? Is it not possible that retail, by way of technology, could one day migrate overseas? Future retail could indeed continue to thrive at the top line, fueled by e-commerce, but powered by a technological platform controlled and dominated by Seattle and overseas corporations, like Alibaba, too.

Future Shock

But maybe we want Shay to be right. Maybe we should just myopically believe, like the captain of the Titanic, that we are immune to disruption. Maybe we should have our heads in the sand.

Net/net, no matter how one slices it, it is hard not to envision a world where fewer people are employed in retail and where the entry-level technological qualifications for any remaining retail jobs are higher than ever before. Retail’s future may indeed still be bright, but it will not be bright for traditional retail employees.

Which begs the questions: How are we, as an industry, identifying our next generation of employees? Do our leaders have the skills to hire a new wave of retail engineers? And then, do we have a responsibility to train our displaced workers? Who are the leaders helping retailers navigate the sea of technological decision-making they need to survive in the future? And even more to the point, who is encouraging small-business ventures in the face of VC-funded long-tail irrationality? This is why we need vision and leadership.

These are the narratives that need to be welcomed and discussed from your pulpit, Mr. Shay. You may say in your piece that you have shared them already, but, candidly, your messages are not getting through. It is time to stay above the critiques, stay out of the semantics and, most importantly, to lead.

I personally challenge Shay and the entire NRF machine to address these concerns and lead the industry into the future with forward-thinking strategies and deployment of resources to make significant structural and existential changes to the industry.

Open the dialogue and encourage debate for the sake of co-creation. Paint a picture, a vision of the future that helps us all get to a better place. Tell us that you hear us and tell us everything you are doing about it. And never rest until you have paved a path to a sustainable future.

Wait a second! Just last week I wrote on the race for global dominance between Amazon and Alibaba.  And shame on me for not even mentioning Walmart, especially since I’ve been on a rant about how Walmart is rapidly becoming Amazon’s biggest headache. And now they are about to give Amazon a migraine in the only big ecommerce market still up for grabs: India. Alibaba owns China and Amazon owns the U.S. (albeit looking over their shoulder as the behemoth bears down on them). But India is where these two giants are squaring off.

In review: Millennials make up a third of India’s population giving the country the highest growth potential in the region. According to research conducted by Morgan Stanley, in 2009 the online market in India totaled $3.9 billion. In 2016, it had jumped to $15 billion, and they project it will soar to $200 billion in 2026. According to a report by consulting firm Praxis Global Alliance, Flipkart, including its fashion unit Myntra, is the market leader in India with about a 45 percent share, while Amazon has about a 35 percent share. Snapdeals in India has a minor share and is being eyed by Flipkart as a potential acquisition candidate. Alibaba is a late entrant, and according to CB Insights, they may be in the very early stages of building a super app that will allow it to combine all of its various assets, resembling Tencent’s WeChat app. But currently, Alibaba is only a side show. Amazon and Walmart are battling it out in center ring in this circus.

Amazon and Walmart are both bidding for a stake in Flipkart, valued at around $20 billion (it was launched in 2007 and has yet to be profitable). According to people familiar with the bidding battle, Walmart is a “nose” ahead, intending to acquire a majority stake in Flipkart (it could end up being 50-60 percent) with the objective of increasing Flipkart’s share of market and maintaining its lead over Amazon, thus giving Walmart dominance in the market.

Walmart appears to be favored to win for several reasons.

Out of the box, since Amazon already has the second largest share of ecommerce in India at around 35 percent, they would face major regulatory barriers. Walmart would not (due to their lack of an online presence).

There’s a bit of irony in this move. Walmart has been trying to establish an offline retail business in India for over a decade, but it has been denied because of government regulations protecting India’s mom-and-pop shops. They tried with an offline partner, Bharti Enterprises, but it failed. So, the best toehold Walmart has been able to establish is a chain of 21 Best Price wholesale stores.

Another element that favors Walmart is that Flipkart’s non-strategic investors might find Walmart the most attractive cash-out opportunity and/or best strategic buyer that can provide synergies and more sustainable growth, both online and off. ·One fly in the ointment might be eBay’s $500 million investment for a five percent stake in Flipkart and a four-year exclusive agreement, according to an article in Recode.  So, even if Walmart does acquire a majority stake in Flipkart, as eBay’s deal now stands they would be operating alongside Walmart on the site. Maybe that’s okay with Walmart, maybe not. However, one expert close to the pending Flipkart/Walmart deal believes the behemoth will end up getting what the behemoth wants. I would go with that reasoning. And who knows? Maybe Walmart will find some kind of synergy with eBay, or just let them run out of the four-year contract.

• Flipkart founders Sachin and Binny Bansal favor Walmart because they would keep their jobs and continue with their personal commitment to the market.
• With a majority stake in Flipkart, Walmart also brings its substantial offline retail expertise and can start a new physical retail move. By default, Flipkart also gains expansion into the offline market.
• Flipkart will benefit from Walmart’s omnichannel expertise in the U.S. leveraging the synergy of physical and digital creating a multi-purchasing and distribution platform.
• And finally, the Jet.com knowledge and framework has an edge over Amazon with its “smart basket” expertise. This algorithmic formula for the most efficient, lowest priced basket of goods is beginning to gain traction in the U.S., and is considered a competitive advantage over Amazon.
• While Flipkart does not need help in its fashion categories and mobile expertise, Walmart can add value in grocery and hundreds of thousands of basic, daily household goods. Walmart also has a huge number of private label brands to add to the equation in all product categories.

A major advantage that Amazon has had over Flipkart is Amazon Prime with millions of members. To be competitive, Walmart would likely provide a Sam’s Club offering with two membership tiers: one at $100 annually and the other at $45. While Walmart offers this membership program only offline in the U.S., it has been successfully launched in China online with Walmart’s partner, JD.com. Full disclosure, the jury is still out on its relative success.

Who Will Win Flipkart?

At the end of the day, Walmart needs Flipkart more than Amazon. But Mr. Bezos is a competitive guy and no doubt hopping mad that Amazon lost in China against Alibaba, and Walmart has been able to gain ground there through its partial ownership of JD.com. This could take a while. Both Amazon and Walmart have deep enough pockets to withstand a withering bidding war.

However, I don’t believe this is a case of the highest bidder takes all. I believe the government’s regulatory barriers and Flipkart’s leaders and investors favor a Walmart win.

But, I will never rule out Amazon and its aggressive strategy to take over the world. Amazon never ceases to amaze in surprising and awesome ways.

Radical thinking leads to radical behavior, leads to radical change. And now more than ever, radical change is what traditional retailers need. These three radicals — (clockwise from upper left in image, Chris Duffy, VP of In-Store Environment, Home Depot, Daren Hull, SVP Technology, Stores and West Elm Digital at Williams-Sonoma, Inc,  Mark Bozek, CEO, Live Rocket and Katie Finnegan, Principal, Store 8, Walmart — are innovating in ways that are fueling the radical transformation that each of their companies need to succeed in the rapidly evolving new world of commerce. If you are a retail or branded products executive attending Shoptalk 2018, you should register for our “Wake Up” breakfast on Wednesday, 3/21 at 7:30, for a real radical learning experience.

“Retail Store” – A Mental Barrier to Radical Behavior

Just to get your radical juices flowing, can you wrap your brain around the fact that the two words “retail” and “store,” will soon become extinct? Why? Because for centuries, since the French coined the word “retail,” we have used both words to define a physical building which stores goods for sale to customers who come to the store to buy them. So, now whenever people hear those words it automatically triggers a mental image of a building full of stuff. And this image is a barrier to radical behavior, and therefore to the radical changes that need to be made to that static model.

Dancing with the devil, so to speak, Kohl’s did a deal with Amazon, placing their shops on Kohl’s platform. Rather than closing locations, they’ve replaced shrinking space with Aldi grocery stores, getting into that business overnight, just as Amazon did with Whole Foods.

Had the leadership of Kohl’s recently strategized within the old-world paradigm of Kohl’s as a “retail store,” a static building selling its own and wholesale stuff, the Aldi and Amazon deals would not have happened. They obviously deleted the mental barrier of a static “retail store” and replaced it with an image of a fluid distribution platform, upon which anything and everything can operate, even a fierce competitor like Amazon. This is radical thinking and radical behavior. The message of the moment to the industry: You are not in the retail business. You are in the distribution business. Understanding this paradigm shift will open an enormous new vista of opportunities. In fact, it is necessary for survival in the new world. Think: The poster child of a fluid distribution platform is Amazon. Do you think Jeff Bezos believes he’s in the retail business? I don’t think so. And how about the rapid fluidity with which Walmart is bringing everything and everybody onto its distribution platform? There’s also Nordstrom, Macy’s and other major traditional legacy retailers who replaced those words with a vision of a fluid all-inclusive “platform.”

After thousands of years of hammering the image of a “retail store” into your brain, getting rid of it won’t be easy. But if you want to survive in the new world, you must change your vocabulary and the model.

Speaking of radical behavior, don’t forget to register for the Retail Radicals breakfast at Shoptalk. Click here, or on the banner in the sidebar to RSVP.

The facts from 2017 are in! We have officially moved from an economic engine in which the retailer possessed the power and the consuming masses followed to an environment that is clearly controlled by the consuming public itself. The scales of supply and demand have rebalanced as global supply exceeds our ability to consume it all. The advent of technology has further empowered consumers in their research, experience and purchasing roles. Technology now allows consumers more access to more information in a more timely manner with 24/7 availability. Consumers of all ages are responding to this newfound power by voting on a daily basis on what they like and dislike, want and don’t want, expect and demand — in exchange for their consumable dollars.

The Pull Economy

In this new pull economy, consumers buy what they want, where they want, when they want and leave the excess and unwanted products by the wayside. How much the pull economy has taken away from traditional brands, stores and channels is estimated in 2017 alone by numbers ranging north of $4 billion dollars in terms of volume moved from traditional channels to digitally native options. And the shift is growing. However, it would be a huge miscalculation to simply label this as a channel shift or a technologically enabled shift. There is much more at play in this sea change than technology and channel.

There are two major factors driving this new economy:

1. The shift in buying power from the traditional boomer generation that has dominated the consuming sector for decades to the younger more individualistic generations.
2. The movement of the market composition from a mass grouping of homogeneous buyers into a highly segmented, individually distinct set of segments that demand and expect the focused attention of brands, stores and channels.

These two major trends have been, and continue to reshape the consuming landscape for all product categories from commodities to luxury and even ultra-luxury. These trends are driving the shifts in channel as well as the use of emerging technologies. It is the understanding of these trends, and the ability to strategically address them that will sort out the winners and losers in 2018 and beyond. To this end, it is important to understand the key value and values drivers emerging as a result of this shift in power and influence.

Value and Values in the Pull Economy

There are four major sources of value creation that bear significant weight in this new pull economy. All four are major drivers in how this new consumer views and evaluates value.

1. The first is brand/product relevance. The positive level that a brand/product is viewed as “for me” is critical. The more general the appeal (athletic), the lower the relevance. The more specific and focused the appeal (hiking), the greater the relevance to the target consumer. This consumer mandate makes it difficult for more broadly positioned brands to gain and sustain traction in the face of specific demands. In a fragmented market with such a large number of specialty preferences, more focused brands will have more success than those with a broader approach.
2. The second source of value is product curation. The previous age of variety has given way to an age of “less is more” and “quality versus quantity.” Younger consumers, losing their enamoration with disposable fashion, are developing a “best of” mentality that seeks enhanced product quality, sustainability and longevity. They desire to be offered a thoughtfully designed and artfully developed product complete with value-added features. These add-on attributes represent something specific to them and their needs/lifestyle rather than facing an impersonal choice in an overwhelming sea of choices. Today’s savvy consumers prefer to spend their time selecting from their personally curated “best of” products rather than paging through endless thumbnails of similar products with indiscernible differences.
3. The third major source of value is authenticity. Today’s consumer seeks what is real, genuine and original. They highly value “story” but only if it is an authentic narrative. Credibility is major and this consumer sniffs out artificial very quickly. For example, there are multiple outdoor brands (Patagonia, et al.) created and manufactured by enthusiasts, that walk their talk. They design products to meet the needs of other outdoors enthusiasts who provide input on their products. Their business model thrives on authenticity. The value created by being transparent and authentic is difficult to match: It creates a sustainable value advantage over a manufacturer simulating the lifestyle, regardless of price.
4. The final source of value is inspiration. Consumers in the new pull economy want to be inspired by products and brands. This is a major departure from the boomer generation who was motivated by aspiration. This major generational difference makes it very difficult for traditional brands/stores to transition to the new consumer who wants to be his or her best self, reflected in everything from sourcing and manufacturing to the brand promise.

The Pitch Perfect Package

What does success look like in the pull economy? A brand that is focused on being relevant to their target with an authentic story; offers a curated product assortment of innovative products; and inspires the consumer to be his or her best self. Applying this value-creation formula to a relevant channel strategy, supported by the right enabling technology, will only raise the potential for success.

When comparing the strategic focus and operating model of many traditional brands/stores to the pull economy values, it becomes fairly easy to see how the analogy of “square peg, round hole” can apply. The consumer has shifted and the market needs to follow. The patterns of success are emerging and 2018 is a pivotal year that will reveal who will be able to adapt and who will continue to fail. The consumers in the new pull economy will be the ultimate judges.