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Careful Retail Leaders, Financial Analysts are Messing With Your Head

by Robert Hetu  |  May 6, 2016  |  Submit a Comment

That financial analysts have ulterior motives is no surprise but we are all going to have to live in the marketplace they are influencing. I wish I could say retail leaders will cut through all the noise and tell the markets what they are going to do and why they are going to do it. Unfortunately the financial market is leading them around by the nose, excusing a few companies for years of unprofitable growth while excoriating others for slight slippage in revenues or profits. We all know the missives, stores are dead, e-commerce as a percentage of revenue must grow at double digit rates, no one can beat Amazon, blah blah blah. Stop listening to them and instead listen to your customers. I am going to take these one at a time.

Stores are dead – Let me put this politely – baloney.  The inconvenient truth that these analysts miss is e-commerce is still less than 10% of retail sales.  Getting from 10% to 20% is going to be a monumental task, let alone a complete transition.  Retailers need to be very careful with this topic because stores are the place of differentiation. Otherwise the retailer risks becoming just another e-commerce player which is likely a no-win strategy. Yes some markets are over-stored, some stores are too large, some formats are tired, but retailers with physical stores need to think very carefully about cutting the store base too thin. The markets you vacate leave behind opportunity for others to grow. Instead of closing excessive stores for obvious reasons (you can name them), some retailers will regret leaving markets and shrinking store availability which leads to my second point.

E-commerce as a percentage of revenue must grow and double digit rates – More baloney. The reason is not that I don’t think e-commerce is important, its that this is not a one size fits all metric.  Some retailers, particularly the big box type, need to be growing at a faster rate to gain a piece of the pie. Others may find that 5% is the right number, while some like Primark may decide at least for now that e-commerce is not a priority. This leads me to my third point.

No one can beat Amazon – Also baloney. Okay, Amazon is a behemoth, but you are not Amazon so why are you trying to be? Don’t try to out-Amazon Amazon, rather take time to find out what your customers value and do more of that. Retailers beat Amazon every day through great in store experiences, strong customer relationships and excellent execution.

Here are a few other posts you may find interesting:

The Sky Is Falling; Retail Bedtime Stories

Retail Comp-Store Sales Becoming A Useless Measure

Walmart Stock Tanks – Give Me A Break

Beating the Profits out of Retail

 

 

Category: ecommerce  retail-trends  

Tags: amazon  competition  consumers  customer-analytics  customer-centricity  digital  ecommerce  multichannel  omni-channel  retail  stores  trends  

Robert Hetu
VP, Analyst Retail
7 years at Gartner
29 years IT Industry

Bob Hetu is a Research Director with the Gartner Retail Industry Services team. His responsibilities involve tracking the technology markets and trends impacting the broad-based retail merchandising and planning areas. Mr. Hetu is an expert in the areas of brand, vendor and assortment management, merchandise planning, allocation, and replenishment. Read Full Bio




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