An old merchant once told me that the business of retail moves like a wheel — everybody moves from the top to the bottom and sometimes back up to the top again. There was a time when big department stores like JCPenney, Montgomery Ward and Sears Roebuck were at the top of the wheel. Funny, they were also “multi channel” retailers long before that term was coined because they had both stores filled with merchandise and catalog “big books” for their customers who lived too far away to shop in a city store.
Next on the wheel were the regional department stores. Stores that might have had eight to twelve branches within a state and catered their offering to a specific customer. These stores forged an emotional attachment with the community by sponsoring fashion shows and other local events. Your friends and neighbors worked in these stores. It was a big deal to take the kids to have their picture taken with Santa there. I always think of the movie A Christmas Story and the Santa’s Workshop scene in Higbee’s department store as the “warm and fuzzy with a dark side” example of these stores. Most of them were gobbled up during the latter part of the last century in a frenzy of acquisition and are now just fuzzy memories.
Then we Americans continued to expand in our usual “bigger must be better” mode and built destination malls to aggregate a whole bunch of stores under one roof with “anchors,” usually department stores, at the ends. Instead of having to park on a street downtown we could just park our cars in gargantuan lots and spend hours wandering around in temperature controlled climates all year ’round. There were pizza places and record stores to hang out in while your mom shopped. And it became a bona fide teen hang-out with the advent of video game arcades. These malls were a terrific setting of popular culture — think of Fast Times at Ridgemont High or Kevin Smith’s tour de force, Mallrats. I worked a couple of mall store jobs in my youth. One job was at a place that made smoothies and since I wasn’t old enough to drive my Dad used to fall sleep on a wooden bench out in the mall on the nights I had to close. It was a terrible work environment, but I didn’t know any better and they let me go right after the holidays. I had to return the Santa hat I was required to wear but they let me keep the pre-Hooters style tee shirts that were my “uniform.”
Since folks love to shop when they go on vacation some forward-thinking developers created malls for manufacturers to sell directly to the consumer without alienating their retail clients and the outlet mall was born. Today’s upscale outlet malls entertain an international clientele because they offer a large range of product in big-name brands in one very large, easily accessible location.
And then there is Walmart, the world’s biggest retailer with $485 billion in revenue and 1.4 million employees. The big WM hung around at the top of the retail wheel for a very long time, but now they are starting to slip as Amazon increases in strength. I’m measuring this by market capitalization — back in July Amazon’s market capitalization (~$263B) surpassed Walmart’s (~$234B).
Now you don’t even need to go shopping in a store anymore which makes it perilous to maintain a physical store anywhere. Back in September Macy’s announced that it plans to close 35-40 stores in early 2016. Strangely enough this announcement came shortly after the chain launched its test concept of “Macy’s Backstage.” The assortment of merchandise “Backstage” will include clearance goods from Macy’s stores and special items from other brands between 20 to 80 percent off the original price. Hmmm, does anybody else remember “clearance stores” in those big old malls of the 1970’s? They weren’t pretty; cavernous spaces with aisles of tables and racks where strange colors of clothing assaulted the eye. But it gave its elegant sister store space to bring in the “next best thing,” and it humbled merchants a bit to see their assortment errors all in one place. Kohl’s is also experimenting with this concept as a way to liquidate its returns from web shoppers. As another wise merchant once said, “everything has a price.” But if somebody returned it at least once…. well, why would I want it at even x% off?
And speaking of “returns” — what about the concept of Rent The Runway? Have a black-tie event once every five years? Why buy a dress when you can rent one for three days? Keeps you out of the stores and junk out of your closet. Now before you think of that as a concept far from traditional retailing, just think about the liberal return policies of some retailers. I’ve known more than one person who is the poster child for returning a dress on Monday that was purchased the previous Thursday. I think it’s genius to bring that concept out in the open as a business.
Career-wise I “grew up” in retailing — what I liked most about it was the unpredictability of it. Yes, we kept sales history by day, a weather diary when I worked in seasonal departments, and we wrote recaps of the month that we saved to review when we planned the following year, but the trends could still surprise us. The year Nirvana exploded and flannel shirts blew out. Nobody saw that coming when teenage kids bought every flannel shirt in patterns only a grandfather would choose.
Another merchant from my past counseled the team when we hit a rough patch of business that we didn’t get dumb overnight. The things we did when the business was on the upswing were different from the things we will do as the business cycles down, but our collective business intelligence had not disappeared. The wheel of retail is spinning faster with both the need to be nimble with our business intelligence and ability to get bigger faster. The massive collection of data drives a large portion of this growth — if you shop on Amazon just look at all the products it “recommends” for you. Retailers have to make you want what they are selling or they need to make coming to their physical location more compelling than swiping a screen or clicking on a picture. Maybe good retailers really do re-invent the wheel when they tap into both a need and a want, but this relationship now feels less emotional on both sides, more transactional. Is the variable of human interaction less desirable for both parties? Is “customer service” still an important attribute, and how is that defined now? What I find intriguing about any successful retailer is how it anticipates the customer, but not in a creepy way. Luckily Amazon still makes me laugh with its recommendations based on my buying history so I still feel smarter than its algorithms (for now), but it makes me wonder about the retailer who will surpass Amazon eventually.