Don't Waste The Crisis
Rahm Emanuel, president-elect Obama's newly appointed Chief of Staff, recently said that "A crisis is a terrible thing to waste." That's sage advice for retailers too. Today's opportunity lies in deciphering what consumer trends mean at the buyer's moment of truth - when she has to write the vendor purchase order line item.
The specter of a deep recession's impact on consumer spending presents a teachable moment. What can we learn? Where's the opportunity in today's crisis? What's needed to seize it?
Look where we are. Best Buy Chief Executive Brad Anderson put it this way: "Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen." Best Buy, he said, "simply can't adjust fast enough to maintain our earnings momentum for this year."
Comp store sales make clear that changes in consumer spending have been seismic. The teachable moment here lies in asking why those sudden changes left a great retailer like Best Buy flat-footed. Today's crisis will be wasted if we don't test the conventional thinking that has led us here.
Detecting Tremors
Let's explore Mr. Anderson's seismic simile. All seismic events are preceded by tremors. Animals notice them first. Scientific instruments do too, if they're in the right spot. Earthquakes take as many lives as they do because what animals and instruments detect isn't aggregated, processed, and distributed fast enough.
Can the same be said about retail? Do tremors run ahead of disruptions like the one we find ourselves in today? Can they be detected? Can the information they contain be aggregated and processed fast enough to make a difference?
The first three of those questions can be answered in the affirmative. Tremors ran ahead of this quarter's meltdown and they were detected. But today's tools didn't convert the tremors' signals into actionable intelligence buyers could use. A complete voice of customer solution could have provided actionable guidance.
Lost in Plain Sight: The Creep to Cheap Wasn't Sudden
Given the historical nature of the day, you might have missed the November 4th issue of NRF Smart Brief, which carried a provocative headline: "It's suddenly cool to be cheap." A Wall Street Journal article printed the same day made a compelling case that the creep to cheap had started long before the credit crunch crashed the markets and consumer confidence barometers plummeted.
A Google search of "cheap chic" turned up more early warning signals. An April 3rd CBS news story concluded consumption is out. It quoted a Saturn commercial: "Some say what you spend your money says a lot about you. At Saturn, we feel what you save your money on actually says a lot more." The new status? "It's not how much you spend, but how much you don't."
The growth of Real Simple feels like another tremor. In 2000, its circulation was 400,000. Today it's over 1.9 million, a spectacular growth winner in a punishing environment for print media. Its demographics are stunning: median household income of $90,000 with 86% of readers college educated. Upscale consumers have been craving its "do more with less" ethos for years.
Agile Supply Chains and Fast Development Aren't Enough
Now, let's turn to another question - can a retailer aggregate, process, and distribute the information contained in those tremors fast enough to make a difference? Here's where we run into trouble. Like many other great retailers, Best Buy has dramatically improved planning, pricing, supply chain, vendor management, distribution, store operations, and customer service. It's more agile and resilient than ever.
Despite that broad front of improved capabilities, retailers got caught flat-footed this quarter because they had the wrong merchandise on the floor. They all heard the same rumblings and felt the same tremors that CBS News, Real Simple, and others have detected for months, which are eons of time when looked at in relation to today's fast-cycle product development and agile supply chains.
Despite ample time, they couldn't convert market-level or consumer sentiment data into the product-level information their buyers needed to put merchandise their customers want on the floor.
Actionable Intelligence the Buyer Can Use
Getting the product right is where we bump up against the limits of business as usual. Today's framework focuses on timeliness - detecting trends sooner - which is essential, but still only a half-solution. That speed advantage is wasted if the signals the trends carry can't be converted into actionable information buyers can use to get the item right to buy what customers want.
Today's opportunity lies in deciphering what consumer trends like cheap is chic or green is cool mean at the buyer's moment of truth - when she has to write the vendor purchase order line item.
Use Customer Influence to Seize the Opportunity
Seizing this opportunity takes giving the consumer greater influence over item selection and line planning. That's a tall order, but if we break it apart, the key requirements come into view.
1. The first requirement is immediacy - consumers have to be closer to the decision. A second is insight - inputs from savvy consumers have to count more.
2. Speed and scale add two more requirements - consumers' influence has to be available when needed for every decision needed.
3. The style and setting of merchant decision-making adds the final set of requirements: guidance needs to be intuitive and self-evident.
Winning the "Shop Me First" Race Takes Understanding the Voice of Customer
Getting the product right has never been more important. It increases the potential value of all the other decisions you make about pricing, allocation, localization, and store operations. A product line full of winners strengthens customer loyalty and reinforces your brand.
Getting the product right has also never been more difficult. Consumer trends move at a fast pace. Product lines and assortments move off the floor sooner. Great product is always in short supply.
Winning in this environment takes connecting merchants to customers and both to store associates in a complete voice of customer solution.
The specter of a deep recession's impact on consumer spending presents a teachable moment. What can we learn? Where's the opportunity in today's crisis? What's needed to seize it?
Look where we are. Best Buy Chief Executive Brad Anderson put it this way: "Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen." Best Buy, he said, "simply can't adjust fast enough to maintain our earnings momentum for this year."
Comp store sales make clear that changes in consumer spending have been seismic. The teachable moment here lies in asking why those sudden changes left a great retailer like Best Buy flat-footed. Today's crisis will be wasted if we don't test the conventional thinking that has led us here.
Detecting Tremors
Let's explore Mr. Anderson's seismic simile. All seismic events are preceded by tremors. Animals notice them first. Scientific instruments do too, if they're in the right spot. Earthquakes take as many lives as they do because what animals and instruments detect isn't aggregated, processed, and distributed fast enough.
Can the same be said about retail? Do tremors run ahead of disruptions like the one we find ourselves in today? Can they be detected? Can the information they contain be aggregated and processed fast enough to make a difference?
The first three of those questions can be answered in the affirmative. Tremors ran ahead of this quarter's meltdown and they were detected. But today's tools didn't convert the tremors' signals into actionable intelligence buyers could use. A complete voice of customer solution could have provided actionable guidance.
Lost in Plain Sight: The Creep to Cheap Wasn't Sudden
Given the historical nature of the day, you might have missed the November 4th issue of NRF Smart Brief, which carried a provocative headline: "It's suddenly cool to be cheap." A Wall Street Journal article printed the same day made a compelling case that the creep to cheap had started long before the credit crunch crashed the markets and consumer confidence barometers plummeted.
A Google search of "cheap chic" turned up more early warning signals. An April 3rd CBS news story concluded consumption is out. It quoted a Saturn commercial: "Some say what you spend your money says a lot about you. At Saturn, we feel what you save your money on actually says a lot more." The new status? "It's not how much you spend, but how much you don't."
The growth of Real Simple feels like another tremor. In 2000, its circulation was 400,000. Today it's over 1.9 million, a spectacular growth winner in a punishing environment for print media. Its demographics are stunning: median household income of $90,000 with 86% of readers college educated. Upscale consumers have been craving its "do more with less" ethos for years.
Agile Supply Chains and Fast Development Aren't Enough
Now, let's turn to another question - can a retailer aggregate, process, and distribute the information contained in those tremors fast enough to make a difference? Here's where we run into trouble. Like many other great retailers, Best Buy has dramatically improved planning, pricing, supply chain, vendor management, distribution, store operations, and customer service. It's more agile and resilient than ever.
Despite that broad front of improved capabilities, retailers got caught flat-footed this quarter because they had the wrong merchandise on the floor. They all heard the same rumblings and felt the same tremors that CBS News, Real Simple, and others have detected for months, which are eons of time when looked at in relation to today's fast-cycle product development and agile supply chains.
Despite ample time, they couldn't convert market-level or consumer sentiment data into the product-level information their buyers needed to put merchandise their customers want on the floor.
Actionable Intelligence the Buyer Can Use
Getting the product right is where we bump up against the limits of business as usual. Today's framework focuses on timeliness - detecting trends sooner - which is essential, but still only a half-solution. That speed advantage is wasted if the signals the trends carry can't be converted into actionable information buyers can use to get the item right to buy what customers want.
Today's opportunity lies in deciphering what consumer trends like cheap is chic or green is cool mean at the buyer's moment of truth - when she has to write the vendor purchase order line item.
Use Customer Influence to Seize the Opportunity
Seizing this opportunity takes giving the consumer greater influence over item selection and line planning. That's a tall order, but if we break it apart, the key requirements come into view.
1. The first requirement is immediacy - consumers have to be closer to the decision. A second is insight - inputs from savvy consumers have to count more.
2. Speed and scale add two more requirements - consumers' influence has to be available when needed for every decision needed.
3. The style and setting of merchant decision-making adds the final set of requirements: guidance needs to be intuitive and self-evident.
Winning the "Shop Me First" Race Takes Understanding the Voice of Customer
Getting the product right has never been more important. It increases the potential value of all the other decisions you make about pricing, allocation, localization, and store operations. A product line full of winners strengthens customer loyalty and reinforces your brand.
Getting the product right has also never been more difficult. Consumer trends move at a fast pace. Product lines and assortments move off the floor sooner. Great product is always in short supply.
Winning in this environment takes connecting merchants to customers and both to store associates in a complete voice of customer solution.