The Future of Retailing

This is the third and concluding post in the TMA Webinar on Retailing held last Wednesday (2/18)/ The three part series starts here.

In this post, I hope to stretch the thinking of readers as to the need for business models to change in most industries, including retailing.

Now, I don't consider myself a retail expert. Early in my career, I was the bank workout specialist on a very large regional grocery store chain and on a national specialty retailer. Then, during my years with Coopers, I served as CRO for a couple of large regional retailers. And, I have enjoyed a twenty five year client relationship with a major retailer. But, even with (all) that, I consider myself an informed observer, not an expert.

My retail exposure has, however, brought me into contact with some amazing retail executives. A couple that come immediately to mind are Jeff Holczer who I consider to be one of the sharpest retail CFO's, and Marvin Shapanka who has a rare combination of deep, traditional merchandising experience and deep experience in internet retailing. I am always pushing Jeff, Marvin and other retailing execs that I know as to their thoughts on how retail needs to fundamentally change in view of the present economy.

In the interest of stirring up the pot as to the need for fundamental change in business models, let me suggest six changes that every retailer should be carefully considering:

1. “Own” your customers. Reinvigorate a focus on customer loyalty by applying best practices being successfully used in other industries.

2. Take advantage of the shift in the labor market to get higher quality store personnel and dramatically increase the expectations as to their performance in providing great service to customers.

3. Fully leverage the company’s internet retailing presence by following an aggressive cross channel strategy, with respect to marketing and sale of goods.

4. Rethink store design and store location so as to increase real estate efficiency. Aggressively pursue getting all stores to (current) market rate leases, for the right size stores, in the right locations.

5. Rethink the inventory investment levels in a store and make better use of internet option (and fulfillment center) for slower moving items, so as to increase inventory efficiency.

6. Rethink the role of the CFO in an environment where uncertainty is likely to reign supreme for the foreseeable future, where the efficiency of capital usage will be more important than ever, where deflation will likely be more of a factor, and where operational efficiency will be key to creating competitive advantage.

Now, those of you with retail experience can undoubtedly add to my list. But, here is my point: how many Restructuring consultants are focusing their retail clients on these kind of fundamental issues, not just on slashing expenses.

I am big believer in aggressively cutting expenses in view of rapid declines in revenue. But, what Restructuring consultant worth his or her weight can't do that...almost in their sleep. The real test is how many consultants can also show their clients how to increase market share of the business that does exist out there in a given market segment?

The bottom line is that lenders and investors are not being kind to any business that does not have a compelling value proposition. Seldom will just tinkering convert an average company into one with the requisite compelling value proposition. What an opportunity for Restructuring consultants with insights into the necessary business model changes in a given industry!