Only the Paranoid Survive by Richard Tyson

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Have you noticed the number of major retailers closing their stores these days?  According to Business Insider, as of April 2017, nine major retailers, including Payless Shoe Source, the Limited, Radio Shack and Sports Authority, have filed for bankruptcy.

My wife and I stopped by our local Sears store a couple of weeks ago to shop for a lawn edger. When we walked in, we had to wonder if the place was open for business. Except for a few other customers milling around, there was virtually no one there.

Eventually, we tracked down a sales associate and the floor model of the edger I wanted. It should have been a quick and easy transaction, but alas, there was no warehouse stock of the model I wanted and our salesman would not sell us the floor model.

As we exited the store, I commented to my wife: “Hardly any sales personnel, inadequate inventory to meet demand…this store is on the verge of shutting down!” Less than a week later, Sears announced that it is closing our local store, along with many other units around the nation.

Sears, Macy’s, JC Penney and others have also announced plans to close thousands of their stores in a last-ditch effort to survive. It’s a trend that’s amazing to us baby-boomers, who remember when these businesses seemed invincible. Indeed, in 1976-77, I worked for the Jewel Foods Company, then the second-largest retailer in the world. It was eclipsed only by Sears.

Today, these two giants teeter around 20th in the world, and continue to fall in the rankings.

The world’s largest retailers now have an ominous rising star named Amazon.com (now at #7). Walmart, Costco, and Kroger presently occupy the top three spots, but the winds of change that have destroyed many brick-and-mortar retailers are signaling a sea of change for these giants as well.

As Washington Post writer Larry Downes recently put it, “As traditional retailers cut staff, dimmed the lights and left aging inventory on the shelves, Web-based sellers continued investing everything they had and more. They added free shipping, easy returns, same-day delivery, targeted promotions, customer reviews and mobile interfaces, all of which transformed online shopping into a richer experience [emphasis added] than getting in the car, driving to the mall, looking for parking, and hoping that the product you want is actually in stock and that someone is available to ring you up.”

The Internet has ushered us into a new commercial environment, one where consumers have come to expect a rich experience that is both more efficient and effective in delivering the goods (and even services) that were delivered under the traditional retail model.

How could this happen to the mighty, the seemingly unassailable retail behemoths?

Former Chairman and CEO of Intel, Andy Grove, has said, “Business success contains the seeds of its own destruction.” These retail superstars clearly became complacent as they experienced year after year of business and financial success. That complacency blinded them to new emerging ways of selling their products. Many saw the Internet as a passing fad, as the realm of techies that would never catch on with the mainstream public. They clearly misjudged the Internet’s potential allure in terms of enhancing the consumer’s buying experience.

Was this demise inevitable? I don’t think so! Following a few simple rules would have helped these large retailers form strategies that would have had them leading the Internet technology wave rather than being drowned by it:

 

  1. Don’t be too impressed with your press clippings. I attended the Christmas party of a large, successful company some years ago. Their COO stood up and announced that they would be the industry leader for decades to come. The industry still exists today, but the company doesn’t.
  2. Talk—and listen—to your people. The folks in the trenches are usually much more in touch with impending changes than top management.
  3. Look beyond the borders of your own industry. Retailers should have been looking at the Internet, and asking themselves, “How might we use this to enhance the buying experience of our customers?”
  4. While you can’t be in a mode of continuous change, you can—and should—be continually improving. Always look for ways to enrich your customers’ experience.
  5. Remember Andy Grove’s famous maxim: “Only the paranoid survive.” While I don’t recommend paranoia, it’s wise to never take your customers (or your success) for granted.

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