Brick and mortar retail in the United States is in big trouble. Bankruptcy attorneys wait in anticipation.
Retailers aren’t doing themselves any favors when they implement a hasty internet strategy. Here is a story of just such a blunder. It’s hard to tell whether the blunder is the result of deliberate strategy, feuding between divisions of the company, or plain stupidity. The results in any case will be failure of the store network.
This specialty retailer deals in product one normally buys once in a lifetime. It employs commissioned salespeople in 300 stores. Salespeople are crucial to the process; it gives the opportunity for massive upsells.
The product is available in myriad style, color, and size combinations, some of which cannot be delivered until the next production run, a twelve-week cycle including shipping. In most cases, that’s not an actual impediment, but as Amazon has learned, prompt gratification is a profitable feature.
In our not untypical story, a customer selects the style, size, and color of her dreams. The salesperson taps the details into the retailer’s online system and informs the customer of a twelve-week delivery time. The customer thumbs the same information into her smartphone. The retailer’s internet website quotes a ten-day delivery for the same price.
The store has lost the sale and upsell opportunity. The long-term result for the store division will be shrinking volume per location and eventual closures. The salesperson has lost a ten-dollar commission opportunity and motivation to work the next prospect.
The only difference is the lead-time on an internal system and that advertised on the internet.
Mistake or internal competition?
Perhaps a programming error led to the internet advantage. If that were the case, store managers, when faced with an angry salesperson, would have gotten it fixed. Instead, they shrug and say, “That’s the way it works.”
Perhaps the management of the internet team figured out a way to game the company’s system and cannibalize the brick and mortar sales. That’s indicative of a poorly managed company.
Perhaps, the company has taken a deliberate decision to give its online sales an advantage. It has turned its stores into showrooms with no expectation of sales. It expects the savvy customer to go online. It allows a ten-dollar cost savings (no commission) on every sale. I would argue that it’s a sleazy way to increase the pressure on salespeople and store managers while maintaining the total sales number.
Amazon will face the same internecine struggles as it sells its Whole Foods 365 Everyday Value brand over the internet. It can cannibalize store sales by offering a lower price (or free delivery).
Lest we forget, Sears Roebuck and Company faced the same conundrum. Sears was the world’s largest retailer until 1989. The Sears catalog and its Christmas supplement The Wish Book were thicker than most metropolitan phone books. From it, one could order a house in kit form or a Harley Davidson motorcycle. It offered a diminutive credit card that was often a young consumer’s first venture into credit buying. It started the Discover credit card and Allstate Insurance. At its peak, it owned Coldwell Banker and Dean Witter. Sears, like Amazon, was rich beyond imagination. It built the Sears Tower in Chicago, which for 25 years was the world’s tallest building. Today, the Sears Tower, Dean Witter, and the Wish Book are fond memories.
The brick and mortar retailer needs to anticipate the internet threat from without and within.