An Innovative Offense Is the Best Defense
Larry Selden, professor emeritus, finance and economics of Columbia University and the Wharton School of Business, calls this current phase “an extraordinary time for retailers.” Why?
Besides facing the worst retail sales since 1969 (Selden’s words), chains are dealing with declining retail share prices, and more companies are partnering with a new group of retail investors—private-equity firms. Tension is further exacerbated by a volatile economy, the threat of a recession, and a slumping housing market.
While these elements are clearly causing anxiety across the retail industry, “Something can be done to increase stock prices,” Selden told attendees at the recent RetailConnections Business and IT Executive Summit in Boca Raton, Fla.
“As retailers struggle in a weak economy, the first thought is to cut costs,” he said. “But this is not the time to be playing defense.”
At first, his statement struck a nerve. Then it hit me: There has never been a better time to step up innovative solutions investments.
Still not convinced? Consider the point of view of Bennett Nussbaum, Winn-Dixie Stores’ senior VP/CFO. “This is not a time to question, ‘What can I cut?’” he said during the conference. “The real issue is what shouldn’t be cut?”
For me, the answer is obvious: Retailers should re-evaluate their commitment to adding innovative solutions.
Clearly, this is no time to blindly jump into bleeding-edge applications. On the other hand, the timing is perfect for companies to explore and deploy innovative solutions.
By definition, these technologies add or enhance key value to the company by creating efficiency, improving performance or reducing operating costs. Most importantly, these solutions could be a key differentiator for chains once the economy picks up.
This mind-set could change the face of retailers’ current game plans and budgets—especially long-term ones. And no two companies’ strategies will be the same.
Since each chain’s needs are different, it will be interesting to see where chains will focus their efforts and IT budgets. While that remains to be seen, here are my top predictions:
Sure it seems risky to make these significant investments in such a volatile marketplace. But the strategy is a long-term one.
Get the investment and growing pains out of the way now. When your competitors are playing catch-up later, you’ll remember why you took the chance.
Wal-Mart to sell earth-friendly CDs
SANTA MONICA, Calif. As part of Wal-Mart’s “Earth Month” the company is selling more than 20 Universal Music Group titles that come with special earth-friendly inserts. The inserts are made with special seed paper and, according to the companies, can actually bloom into wildflowers.
The inserts, in addition to being good for the environment, also offer consumers three free digital downloads from Universal Music. Universal also said that a number of its new CDs will be packaged in third-party certified, renewable recycled board and recyclable paper.
ODP urges rejection of Levan nominees
DELRAY BEACH, Fla. Office Depot is continuing to urge its shareholders to reject dissident nominees and elect the company’s nominees to its board of directors at its annual shareholders meeting this April.
In a proxy statement sent to investors, Office Depot said that Alan Levan’s proposed nominees would do little to help improve shareholder value. According to the statement, Levan’s company, Levitt Corp. has seen its share price fall about 93% over the past three years and that its subsidiary, Levitt and Sons, is in bankruptcy. Office Depot also noted that BankAtlantic, of which Levan is chairman and ceo and one of his nominees, is president of real estate, construction and development, share price has dropped approximately 75% over the past three years.
Office Depot also cited news reports that commented on Levan’s failing business ventures, as well as others that said that his nominees are not qualified to serve on Office Depot’s board of directors.
The company pointed out nominee Mark Begelman’s experience with Mars Music, a company he founded in 1997 that went bankrupt in 2002. According to Office Depot, many news reports attributed this failure to a flawed business strategy.
According to Office Depot, when Levan’s other nominee, Martin Hanaka served as chairman of Sports Authority from 1998 to 2003, the company saw its price fall by about 13%.
Office Depot stressed that its directors best understand the company and are well-suited to help the company grow.
“We strongly believe that removing two of the most experienced retailing executives from our board, including our current ceo who is driving the implementation of our strategic turnaround plan, would be highly disruptive, could delay the implementation of internal and external initiatives and could damage prospects for a successful turnaround,” Office Depot said in the proxy statement.