Big thoughts from "The Big Think"

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I recently attended the National Retail Federation’s (NRF) “Big Think”. The Big Think is an annual invitation-only event hosted by Tracy Mullen, CEO of NRF, and her staff. NRF is the “voice” of retail and represents an industry with more than 1.6 million U.S. retail companies, more than 25 million U.S. employees (approximately one in five workers) and 2007 sales of $4.5 trillion. Retail is the nation’s single largest private employer.

NRF invited a small group of executives from retail and retail technology, marketing and service providers to discuss both current retailing issues and future trends. The event consistently creates a provocative “industry brain share” designed to help the retail industry survive and thrive even when the times are tough. The priceless discussions that take place during the Big Think would not naturally occur during the course of normal life in a competitive work environment, and I’m grateful that Tracy has a vision that nurtures this kind of annual dialogue.

Topics we covered this year included:

  • The Economic Crisis and Its Impact on Retailing.
  • The New Administration and What It Means for Retail.
  • Winners and Losers in This Current Environment.
  • Successful Survival Strategies; and Cross-Channel Initiatives.

In today’s post, I’ll provide an overview of the content of our discussions as well as some of my perspectives. In future posts, I’ll dive deeper into some of these subjects. I invite you to share your views about the themes that emerged from the Big Think. Did we focus on the right topics? What issues are keeping you awake at night? How is your organization facing down some of the challenges we discussed?

Theme No. 1: The economic challenges we currently face combined with the fundamental shift in government is having a significant impact on retail. In the midst of the most challenging economy in many decades, we are also undergoing a significant transition from an administration that believed in less government involvement to one that believes in more.

Regardless of political viewpoints, one challenge all retailers face is solving the puzzle of how to get consumers to start spending again in a down economy. Today, consumers feel the need to save, not spend. Traffic and average ticket price are significantly down for the majority of retailers. Consumers need to feel good about going back into stores and spending. Consumers have driven this economy for decades, and in past recessions consumers played a key role in righting the ship. Retailers have cut operating expenses to weather the storm, but top-line demand needs to reemerge. NRF continues to advocate economic stimulus aimed at this issue such as instituting several National Sales Tax Holidays over 2009. Substantial retail experience shows that sales tax holidays provide a substantial inducement for people to shop.

Several other critical issues facing retailers are the Employee Free Choice Act’s Union Card Check Bill and health care reform. “Card-check” legislation, if passed, would effectively eliminate secret ballots in union organizing elections. The legislation would make every retailer more susceptible to unionization, and retailers’ costs would most certainly go up as a result. This legislation was reintroduced in Congress this week, but opponents are emphasizing the damage it could do to businesses already struggling to survive the recession. The health care debate should also be closely watched. NRF and its constituency of retailers continue their commitment to providing health insurance to employees, but want government lawmakers not to pass measures that would further drive up high costs for employer-provided coverage and instead adopt health care reform initiatives that would reduce costs and expand access to coverage. Both of these issues will most likely reach the House and Senate by Summer, 2009.

The retail industry eagerly awaits specific proposals on each of these programs.

Theme No. 2: The economic crisis is having a drastic impact on retailers’ longer-term strategic investments. Operational and Capital Expenditure investments have been slashed. Store closing announcements are outpacing new store opening headlines. Credit, often needed to finance inventory, continues to be extremely difficult at the same time market cap values are drastically being reduced. Global expansion and sustainability initiatives that were gaining momentum in 2008 have been put on the back burner for the time being.

While overall IT investments have declined over the past several months and are expected to remain leaner at least through 2009, retailers are redeploying their focus and spending money in several areas:

  • Analytics and optimization technologies that improve top- and bottom-line income, cash flow and asset ratios.
  • Technologies focused on global sourcing visibility and private label management as retailers are emphasizing private label expansion.
  • Improved data security.
  • Technologies designed to improve the cross-channel shopping experience making it more inviting and exciting to the consumer.

These technologies include customer and Web analytics, mobility, social networking, more interactive Web sites and marketing initiatives designed to interact and converse with (rather than simply “talking to”) the consumer wherever that consumer is spending his or her time. In other words, the term “digital retailing,” which encompasses all of the above, is quickly replacing a sole focus on e-Commerce initiatives. If you haven’t made strategic investments focused on digital retailing before, now is the time to make the leap.

Consumers over the next several years will continue to expect more and more interactive dialogue across all channels of a retailer’s brand. After all, a start-up investment in digital retailing often costs less than opening a bricks-and-mortar store, and can be done judiciously over time.

Theme No. 3: Reinvention or extinction? A major paradigm shift is happening in retail. No consumers feel good about spending money on “wants.” Instead, they are pulling back and only spending money on perceived “needs.” We’re also experiencing a seismic shift in consumers themselves. We are leaving the “badging” generation of people who often spent money to procure the best house, the best car, the best vacations, the best foods, the latest high-end designer fashions. We’re coming into a generation of consumers who embrace a life style of sharing, community and less emphasis on the acquisition of material things. This generation also thrives on digital networking and collaboration more than relying on more traditional communication that involves physical boundaries.

As a result, certain retail sectors have become more vulnerable than ever before. What will happen to luxury brands and department stores as they learn to respond to future generations with different lifestyles and perceived needs? And, regardless of your retail sector, reinvention at a time of economic turmoil is critical in order to emerge as a company who understands the new generation of consumers who “need” your brand.

Many consumers have put their heads in the sand in dealing with their 401-K statements (or 101-Ks as they’ve often been relabeled). But now is not the time for retailers to put their heads in the sand and focus solely on cost cutting. Cost cutting is a short-term survival tactic, but it’s not a long-term strategy for thriving. Despite entering a time of uncertainty, there is a silver lining: Crisis breeds reinvention. How will retailers reinvent themselves over the coming decade? Will interactions with individual customers take place in person, in multiple media venues which can be analyzed in real time to better satisfy customers needs, or some hybrid of both models? How do retailers leverage this difficult time to emerge as a leader in the future? This is a time to focus on running a leaner, more efficient organization. But, is it also time for you to figure out how to reinvent your company and leapfrog your competition in the process?

We’ll discuss these topics and more in future posts. In the meantime I welcome your ongoing contributions to this conversation. I’d also encourage you to visit NRF and NRF’s Digital Division for progressive updates on some of these topics.

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1 Comment

  1. Hello,
    Great Blog I will defiantly bookmark your blog. I am also having a blog related to retail
    http://newsonretail.blogspot.com/ which gives latest analysis and trends in retail industry in the present recession period. I would appreciate if you could kindly bookmark my blog too.
    Thanks,
    James

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