By Kathy Gersch, executive VP, Kotter International
One thing is certain in the world of retail: the pace of change is accelerating, and competition is fierce. Longstanding retail behemoths are dying, new specialty stores are springing up overnight, and everyone is desperately searching for new ways to stay ahead of the competition while keeping themselves from sinking. People talk about this, but in my opinion, they are missing the true problem.
We’re currently seeing the annual discussion around Thanksgiving and Black Friday schedules — who is opening when, what this means for sales, etc. For instance, for the first time ever, Macy’s is opening on Thanksgiving, and K-Mart, the struggling retail giant, will open at 6 a.m. on Thanksgiving, staying open for 41 hours straight. These moves, their benefits, and their implications, have been debated at length.
While staying open longer may help in the short-term, tactics like this are just Band-Aids for the real problem — retailers need to innovate in ways that will fundamentally improve their customers’ experience and make their brand relevant to shoppers today. To beat the competition in the long term, instead of trying to simply out-discount, out-sell, and out-advertise their competitors, retailers need to focus on out-innovating them. The key to leading the market today is a strong culture of innovation that permeates through the entire organization and focuses where it counts — on the customer.
Where Innovation is Needed
Few retailers have taken innovation past the point-of-sale. Recently, we’ve seen more retailers using mobile tablets instead of traditional cash registers. And while this may be a great idea, I’d argue that it’s not going to be a game changer. Former J.C. Penney CEO Ron Johnson thought so when he unveiled a strategy to eliminate cash registers at Penney’s, but he quickly found out that his company needed a lot more than a revamped checkout experience to turn itself around.
Retailers have been missing the boat. They need to focus beyond the point-of-sale and instead work on revolutionizing the customer experience. Some retailers have already started moving in this direction. Saks Fifth Avenue, for example, launched an iPad app that allows users to fit clothing to their specific body type before purchase. Warby Parker allows customers to try on glasses without leaving their house. And, Hointer, the Seattle-based start-up, is allowing customers to scan clothes they like on the racks, then have those clothes waiting for them in the dressing room. While these ideas are doing more to simplify operations, they are also small steps toward revolutionizing the customer brand experience.
How Innovation is Unleashed
So what should retail do to create a culture of innovation at their company? How does this work? First, and probably most importantly, company leaders must work to engage the organization and get them aligned around the need for new and innovative ideas. All employees must understand and believe – in their hearts — that innovation is paramount to the survival of the brand, and that it’s possible for new ideas to greatly benefit the company. A clear vision must be defined, and communicated, and then reiterated, throughout the organization that moves employees at all levels to action.
In other words, creating a culture of innovation does not simply mean encouraging your executive team to start thinking outside of the box. Instead, leaders must empower employees at all levels, from cashiers to the C-suite, to work outside the box. They must give them permission to try, and stop asking them to increase "X" metric or to boost sales. Instead, leaders must ask employees to think about what their customers really want, or what would happen if the company did things differently. Then, leaders must encourage employees to ask themselves these questions, generating new ideas and approaches to tackle these issues on an ongoing basis. That’s the only way to create a true culture of innovation.
I believe that what the retail industry needs is not just bigger stores, longer hours, or newer payment technology — it needs more ideas that will change the experience customers have while they shop. By turning on the innovation of your employees, you’d be surprised what you can improve in the near and longer term.
Kathy Gersch is an executive VP at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations.
Barnes & Noble sales plummet
New York – Barnes & Noble employed cost-cutting measures that shifted net loss to net income for the second quarter of fiscal 2014 even as net sales took a tumble. Net income of $13.2 million compared to a roughly $502 million net loss reported in the second quarter of fiscal 2013.
In contrast, net sales of $1.7 billion were down about 8% from $1.88 billion. Revenues declined across all segments of the company, but the decrease was particularly acute in sales of its Nook e-reader, which fell about 32% to $107.8 million with prices and sales both falling.
The company reaffirmed its previously issued full-year guidance, in which it expects retail same-store sales to decline in the high single digits, core retail same-store bookstore sales to decline in the low- to mid-single digits and college same-store sales to decline in the low single digits.
“During the second quarter, Barnes & Noble grew earnings through improved margins and reduced expenses, while also completing another successful college rush season,” said Michael P. Huseby, president of Barnes & Noble, Inc. and CEO of Nook Media. “The company is focused on executing its plans for the holiday season and our booksellers are prepared to welcome holiday shoppers and recommend thoughtful gift ideas for everyone on their list. We have a terrific book title line-up this holiday season, a leading assortment of educational toys and games and a full selection of Nook devices, including our recently released new Nook GlowLight.”
Aeropostale adopts poison pill
New York – Aeropostale Inc. has adopted a poison pill that would be set into motion if a stockholder buys 10% of the company.
The struggling retailer said it was not adopting the plan, effective November 26, 2013, in response to any takeover proposal. Rather, the plan aims to provide stockholders with adequate time to fully assess a takeover bid, and, if appropriate, allow the board time to explore alternatives to maximize stockholder value, the company said.
The announcement comes less than a week after investment firm Hirzel Capital Management LLC disclosed that it bought a 6% stake in the retailer. Also, last week, Aeropostale shareholder Crescendo Partners urged the chain to sell itself. Other investors have expressed concern about the retailer.
The company intends to put the plan to a stockholder vote at its 2014 annual stockholders meeting. The plan will expire on that day if it is not approved.