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From the Co-Founders of The Retail Owners Institute.Tips | Tactics | Insights on the Business of Retailing.
How to deal with the turmoil and stress of today's retail environment?
Recent strategic changes by two global firms – McDonald's and 7-Eleven – offer good reminders for us all.
Each of these long-established businesses dealt with their growth challenges first by listening to their customers (using good data analysis and research).
Then, what they chose to do next offers some "food for thought" for all retailers.
Each of these global businesses is making news by choosing to return their focus to what they are known for. Here are some quick summaries of "Why?" and "How?" they did it.
7-Eleven
What is 7-Eleven known for? Convenience and low prices.
Granted, it is still a habit for many to stop at the corner store on the way to and from work, school and play.
But for 7-Eleven to remain relevant, it needed an updated definition of “convenience” for its best customers: Millennials.
Here is what their research revealed (or confirmed):
Today, people are eating five and six times a day; over 40% of adults are eating alone and on-the-go.
So 7-Eleven expanded its private label brands into portable, snack-sized “healthy and fresh foods”, geared especially to their Millennial shoppers.
Their Go!Smart brand offers an array of fresh foods especially appealing to women shoppers (small portions of turkey chili and cornbread, kale and quinoa salads, hummus, all labeled with nutritional info).
Their branded items also include gourmet nut and fruit snacks.
How did it work out? It has been a winner!
Sales of their private brands have grown smartly (30% in both 2015 and 2016).
Since over 50% of their customers are Millennials – who now are old enough to buy beer and wine – the future looks bright as well.
7-Eleven: Updated, but back to its basic convenience premise.
Similarly, McDonald's has chosen to return its focus to delivering what it’s known for: burgers and fries.
At low prices, from clean stores, and fast.
(Oh yes, Egg McMuffins - how about all day long?)
Why were they even considering a change in strategy? They discovered that fewer people were coming into their stores each year - not a recipe for success!
Their new goal: “A better McDonald’s, not a different McDonald’s.”
They are simplifying the menu, to reduce the complexity of ordering and preparing (saving costs and time.)
They still offer choices to the customer. But not of different items (wraps? salads?), but more choices about the burgers.
Ahh yes. The value of going back to the basics of what they are primarily known for. “You want fries with that?” Now, think about your own stores.
Once upon a time...What were your stores known for? Then think about your stores in today's world.
What are your stores really known and loved for?
Does that still matter to today’s customers? (Be honest!)
If yes, how do you make it even better for that customer?
And then, Get cracking!
So, Amazon announced its plan to acquire Whole Foods, the 440 store natural foods grocer concentrated in urban locations, for more than $13 Billion (yes, with a b). They do have a flair for the dramatic, eh? So, why does Amazon want to acquire Whole Foods?
Our opinion: Amazon is a technology company, and relentlessly data-driven.
We believe they want to acquire Whole Foods for the same reason that drives acquisitions at most technology companies: Amazon wants the Intellectual Property of Whole Foods.
Quick: Imagine an online shopper. Did you imagine a man or a woman?
Full disclosure: We thought that online shopping would be dominated by tech-savvy males. Didn't you?
Well, we thought wrong!
"No business has ever failed with happy customers." ---Warren Buffett, CEO, Berkshire-Hathaway
Buffett's logic is very straightforward: people like to indulge themselves. For some observers, this helps to explain Buffett's investments in "junk food" – from Coke, to See's Candy, Dairy Queen, etc. "The CEO of Berkshire-Hathaway invests in bad food and his diet reflects it: he drinks Coke at breakfast and ice cream is an occasional accompaniment," writes Kyle Stock of Bloomberg News. "When asked about his diet, Buffett has said he aims to eat like a 6-year-old because that's the age at which mortality is least likely."
After watching consumers being riveted on chaotic national affairs for almost a year, we now have put a label on it: “Distracted Customer Syndrome”. And it seems, sadly, to be unrelenting. It started during the 2016 Presidential election campaign. Nothing about that was typical. It made for good television theater, and the networks certainly obliged.
And, we ascribed the sluggish retail sales in the fall to demands of this new American spectator sport.
As we often discuss, retailing is a very dynamic industry, constantly changing and evolving. To be successful, retailers must pass frequent flexibility tests. So we paid particular attention to this recent headline in the New York Times*: "The freshest ideas are in small grocery stores."
"Are retailers eating themselves alive?"
That was the provocative headline we recently saw.
Then this followed: “Retailers' rising e-commerce sales are taking a big bite out of their brick-and-mortar revenues – a wide-ranging problem.”
Other pundits we've seen call it “an untenable dynamic for these retailers.”
“Huh?”, we scoffed, as we read this about major retailers.
The definition of retailing is “selling to the ultimate consumer.” Why does it really matter whether they buy from you in-store or online?
Pat Johnson and Dick Outcalt, The Co-Founders of The Retail Owners Institute®, have been called "The Zen masters of retail finance!" Since 1999, they have been assembling their proprietary content into a unique self-help website. The Retail Owners Institute is an unmatched resource that assists retailers worldwide with basic financial training, assistance and easy-to-use tools. Their engaging and empowering how-to resources about the financial levers in retailing are informative, fun(!), and retailer-friendly. Their promise: "Everyone will 'get it'!" Pat and Dick are recognized experts in strategic retailing. Working only as a team – Outcalt & Johnson: Retail Strategists, LLC – they have been consulting, publishing, and speaking professionally throughout North America since 1990. They focus exclusively on retail, or wherever retail is involved. They work with CEOs, CFOs, boards and owners of retail operations, as well as manufacturers or wholesalers expanding into retail. And they also are Retail Turnaround Experts.
Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"