Month: August 2017

The US Retail Meltdown

Another list came out this week — retail chains closing the largest number of stores this year. No surprise here. We’ve been hearing about closing for months, with every management team blaming the closings on the growth of consumer buying on the Internet.

That’s a convenient excuse, but it’s probably not true. Certainly not in every case.

If Internet shopping were the culprit, we would expect

  • All retail chains selling the same products to be affected, and
  • The level of impact to be similar from one chain to the next.

Neither of those is true.

Overall, Kiplinger is calling for a 4% growth in retail sales in 2017 (for the entire year).

  • That’s the current rate, but it may be optimistic for the year as a whole, as they are also expecting the pace of hiring to slow. (1)
  • Conversely, 4% isn’t a big deal historically, as the chart below shows.(3) The negative trend in retail sales matches the negative trend in US population growth (now at 0.7% per year and declining).

Population change and retail sales are linked. The number of people in the US drives demand for food and clothing, among other things. We aren’t at the point of negative population growth — something Japan has achieved — but that may be in our future.

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24/7WallStreet.com has a list of 25 chains closing at least 60 stores, and some of which (e.g., American Apparel) are closing entirely.(2)

Conversely, TJMaxx, Marshall’s and Home Goods have reported growth in same store sales (sales at stores open at least a year).(4) While sales at TJMaxx rose less than expected in the first quarter of this year (5), it was still an increase, and not the 11.5% decline that Sears has incurred (6).

That’s the point. If e-commerce were a paradigm shift in how consumers shop. We wouldn’t see the variations in results between different stores. It’s time to place the blame where it belongs — on poor decisions by management. Those poor decisions are damaging investors and employees.

That happens when you have management basing decisions on “gut feel” or cutting corners on market research. Not that gut feel is inevitably bad; it’s just very high risk.

And finally,

The people who are advocating border walls need to understand the economic impact of lower population growth in the US.

(Originally posted on Crain’s Comments, vlcrain17.wordpress.com)

Sources:

  1. http://www.kiplinger.com/article/business/T019-C000-S010-retail-sales-consumer-spending-forecast.html
  2. http://247wallst.com/special-report/2017/08/24/22-retailers-closing-the-most-stores-2/
  3. http://www.multpl.com/us-retail-sales-growth
  4. http://www.foxbusiness.com/markets/2017/02/22/tjmaxx-marshall-s-home-goods-bucking-retail-trend.html
  5. http://www.foxbusiness.com/markets/2017/05/16/slowing-sales-growth-at-tjmaxx-marshalls-parent-stokes-retail-industry-concern.html
  6. https://www.cnbc.com/2017/08/24/sears-q2-earnings-2017.html

Differentiation Matters

Everyone has “customers” whether you work in sales or not. Everyone does marketing, at a minimum for themselves to get job offers and professional or social recognition.  So here’s something that applies to you whether you own a business or not.

There is an old truism in marketing:

— The first company to offer a product bears the brunt of the costs for creating the market for that product

— The second company reaps the profits

— The third company captures crumbs from the first two

— The fourth company loses money

The underlying truth is that if you are doing the same thing that others are doing, and nothing different, then you end up competing on price — and that’s a hard strategy with an iffy future. If what you do is a “commodity” and you’re competing on price, well, there’s always going to be someone cheaper. If you can’t keep reducing your costs, eventually you get squeezed out. It’s just a matter of time. (The social analog is the person who is constantly buying lunch for “friends.” That’s expensive and it doesn’t make for solid relationships.)

Think about the cases you know:

(a)  SEO consultants: How many companies do this?  The TopSEO.com list has 100 companies, and there are myriad others across the globe. I get spammed by a couple of new ones every week. Why pick one over another?

(b) Plumbers: How do you pick one licensed plumber over another? Sure you can ask your neighbor who they used, but how much does your neighbor know about plumbers?

(c) Dentists: If you had to find a new one, how would you pick?

(d) Car mechanics?

(e) Insurance agents?  There’s a reason why there’s a 98% washout rate among first year agents.

Who helps you choose by giving a solid reason why they are better than their peers? By solid, I mean a reason that isn’t completely subjective and means something of value to you. Businesses are better at giving people reasons not to choose them — for example, by not returning calls or missing appointments or providing lousy products or services. Positive differentiation is harder and more profitable.

How do you help your prospects choose? Do you give them a solid reason for going with you?