How to Turn Retail Failure Into Success

I once worked as a store detective for one of the UK’s top ten retailers. Many of the incidents of shoplifting that took place during my time at this retailer were not the result of shoplifters outsmarting us, rather they were a result of the store design or the policies and procedures that the retailer had in place.

I remember working in stores where the toilets were located outside the store. This meant that a shoplifter could literally walk out of the store with a trolley full of merchandise and could not be legally arrested because he could claim he was going to the toilet. On many occasions I was the only security personnel assigned to the 30,000 sq. ft. store with multiple exits.

On Sundays, we opened the entrances at 10:30 to allow customers to start browsing. However, we were scheduled to start at 11:00. When we started at 11:00, we would notice people pushing trollies full of merchandise out of the store. Someone in the head office, in their infinite wisdom, decided it was more cost effective to leave the store at the mercy of shoplifters than make a half an hour payment for security. This retailer is one the top ten retailers in the UK, yet senior management were unable to devise a coherent strategy for profit protection.

I once consulted a $25 billion retailer. As I perused the company I noticed that not a single person in the company knew their shrinkage figure therefore not even the financial director knew the profit margin of the company.

According to Dunn and Bradstreet “Of the small businesses that fail, 90% do so because of a lack of skills and knowledge on the part of the owner”.

Based upon my experience in retail, I believe it would not be too much of a fat claim to make that 90% of retail failures are the result of a lack of skills and knowledge on the part of senior retail management.

There are circumstances beyond the control of the individual retailer that they can do nothing about. There are circumstances in which location and demographic changes affect the retail organisation. Yes it is true that people would rather go to Asda or Tesco to buy meat than to their local butcher because of price difference.

It would not be fair to suggest that all retail failures are the result of bad leadership or incompetency. However, what I have tried to point out is that in the majority of cases, especially in the case of High Street retailers, the failure can be directly linked to their inability to embrace change.

The problems of major book, DVD, music and electronic retailers do not rest solely on difficult trading conditions, rather they rest on their inability to grasp the concept of the “Long Tail”.

The “Long Tail”, a concept popularised by author Chris Anderson in his book, “The Long Tail: Why the Future of Business Is Selling Less of More”, examines the changing consumer behaviours based upon the changes in distribution curve.

The proliferation of niche markets brought about by the internet has completely altered the factors of distribution. Consumers are exposed to more choices than ever before in the history of mankind.

While writing this article, I decided to test the “Long Tail” theory. I keyed into Google: “how many types of breakfast cereals are there”. Result: thousands. They were arranged in alphabetical order and it was from A to Y. The average supermarket carries thousands of different product lines.

Furthermore, with the internet consumers are becoming more and more overwhelmed with choices. Amazon and its distributors carry more inventory than a lot of High Street retail organisations combined.

In the “Long Tail” century, how can retailers survive? They can survive by adapting to their environment.

In the “Evolution Theory” Charles Darwin introduced the concept of “Survival of the fittest”. The fittest in Mr. Darwin’s lexicon is not the strongest or the fastest but those who are better equipped for survival or those who are better adapted for their immediate, local environment.

We are already witnessing the “Evolution Theory” at play in the luxury market. Despite the downturn in the economy, luxury retailers are still raking in profit. Even in Spain where the country is on the brink of collapse, the luxury retail sector is booming.

The excuse might be because the rich are getting richer so of course the luxury market will continue to boom. This is partly the case but the main reason is luxury retailers are more adaptive to the changing retail environment.

Luxury retailers run their organisations like a real business with good system, good people, good leadership and effective marketing system. The luxury retailers that are failing are those that have both luxury brands and non-luxury brands and they bring the non-luxury culture into the luxury market.

In order for the retail industry to survive, firstly retailers need to understand that their problem is not somewhere out there, it is right in their board rooms.

Secondly, the industry needs to come to the realisation that there is now a new problem on the horizon and they cannot solve a new problem with old solutions.

What is the new problem?

The new problem is technology and the internet. Just as technology changed the manufacturing and automotive industries, technology is changing the retail industry.

Online shopping grew by 14% in 2011 whilst bricks and mortar retail sales grew by just 1.4%. According to research, conducted by food and grocery analysts IGD, online grocery shopping is expected to rise to 11.2 billion by 2016. The research also revealed that more than 44% of adults will be shopping online for their groceries in the next ten years.

The internet is here to stay and it is going to have a tremendous effect on the industry. As new technologies make our lives easier, it also produces an adverse effect on the world around us.

The High Street is in ruins, retailers big and small are going out of business, however, instead of the industry screaming “Chicken little the sky is falling” it needs to respond to the threat by coming up with innovative “Blue Ocean” strategies.

The difference between the few successful retailers such as Tesco, WalMart, The Body Shop, Harrods, Ann Summers, Holland & Barrett and struggling retailers such as La Senza, Jane Norman, Mothercare, JJB Sports, Clinton Cards, Thorntons and HMV is that successful retailers understand that change is constant, therefore, they are constantly evolving to stay ahead of change while the struggling retailers remain static hoping that change will not last.

Albert Einstein once said “Problems cannot be solved by the same level of thinking that created them.”

The retail industry cannot navigate the 21st century with 19th century thinking or skill sets. It would be like riding a horse on the motorway. I don’t need to tell you what would happen to anyone who decided to ride a horse to London on the motorway.