Innovation is key in retail — so long as it is rooted in realism
By Joseph Bona,
In media interviews of late, Beth Newlands Campbell, the new CEO of Food Lion, has been offering reporters a frank assessment of the supermarket chain’s ho-hum, middle-of-the-road situation: “Staying the same,” she explains, “is not an option.”
Slogans such as these can only go so far. But in the topsy-turvy world of 21st-century retailing, you could do a lot worse than Campbell’s mantra. Retailing, after all, continues to be rife with homogeneity, commoditization and redundancy. Imagine a team of researchers conducting a blindfold test. They strip the logos from inside a wide range of drugstores, supermarkets and big boxes. Then they bring in some blindfolded consumers. Would these shoppers, once their blindfolds were lifted, actually know where they were? Arguably, many would not have the foggiest idea whether they were in chain X, Y or Z.
Such is the sameness of the shopper experience today. While there are leaders in various retailing categories — among supermarkets, for example, chains like Whole Foods, Trader Joe’s and Fairway have carved out distinct identities — many other operators would likely flunk the blindfold test. Their stores are neither good nor bad. They utilize similar layouts, offer basically the same type and level of customer service, sell the same products at the same or similar price and their store environments are generic at best.
To be stuck in the middle in this way is to be on a clear path to irrelevance. For the likes of Food Lion, the trick is to figure out how to give consumers a clear reason to drive past the competition and stroll into your store. Retailers are in control of their own destinies, but to be competitive they need to exercise that control in creative and strategic ways.
Gone are the days when a lagging chain can take a “me, too” approach and try to eke out an existence by copying successful innovators. Nor can you save a bad retail proposition by making incremental improvements alone — things like cleaner floors, brighter lighting or a new customer-service manual geared toward plastering smiles on the faces of your employees. Basic tweaks such as these might have worked 10 or 15 years ago. Today these kinds of changes are table stakes.
Retailing today is hyper-competitive. The bar is higher than in the past. But if staying the same is not an option, how should retailers tackle the challenge of change?
Start with another timeworn slogan: “Know thyself.” Once you identify an opportunity in the marketplace — something like the brand-building and cost-saving potential of private-label products, or the trend toward prepared food — the next step is to take an honest look at whether this opportunity matches your capability. Do you have the corporate culture, backend systems, financial strength, human capital and other resources needed to pull off the reinvention? If not, is the opportunity you have identified so great that it would be worth the herculean effort required to raise those capabilities?
Brand attributes are an important consideration here. Let’s say a chain is widely regarded for its fast, hands-on service. In focus groups, consumers say things along the lines of, “I go to you because you get me in and out of there in a snap.” It would be a disaster to adopt a new program designed to, say, slow the entire experience down under the pretext that longer dwell times translate into greater spending.
Consider the road taken by William Ackman, manager of the $11 billion hedge fund Pershing Square Capital. At the end of August, Ackman announced that he had finally sold his entire stake in J.C. Penney Co. — about 18 percent of the company — amid internal squabbling over strategy. Ackman, of course, had brought in Apple’s Ron Johnson in a failed bid to remake Penney, which saw its sales and stock-price take a nosedive. As CEO of Penney, Johnson had sought to enrich the customer experience, redesign the stores, beef up the roster of brands and otherwise reinvigorate the chain. Unfortunately, though, there was a mismatch between the perceived opportunity and Penney’s capability to execute on it. Johnson’s vision had merit, but it was an expensive and ambitious about-face that required securing the buy-in of shoppers, employees, shareholders and the media. With a clearer message and greater reserves of time and money, the strategy might have worked. Unfortunately, this was not to be.
The Penney saga also highlights the pitfall of launching a reinvention after the company’s market position has deteriorated. A weak position translates into a reduced capability for serious change. And so, even when times are good, true leaders tend to think hard about where they will be, not just a year or two from now, but also 10 or 15 years down the road. They understand that, regardless of how swimmingly things might seem today, a fierce competitor could rear its head tomorrow. As a result, leaders see innovation as a necessity. They constantly look for ways to improve design, product delivery, customer service and more.
This involves risk. A product line might fizzle. A test-store rollout might go nowhere. A ballyhooed mobile app or in-store technology program might fail to live up to its promise. But this is just part of the cost of admission in retailing today. Ultimately, what matters most is the willingness to keep looking forward so that you can move the needle in the direction of the next big idea. This does not have to mean chasing one tech trend du jour after another. If your business is not particular visual in nature, forget about the Pinterest page. The focus should be on how individual technologies and services can bolster and fit into the overall mission. Where does the company need to be in the marketplace? Who does it most want to serve? What do these customers want, and how can you meet or exceed their expectations?
Staying the same is easy. Innovating is hard. But by being honest and realistic about the limits of the brand and the actual capabilities of the company, it is possible to stay on the leading edge. Otherwise you fall prey to inertia, which is no option at all.