Most people find change uncomfortable. It’s so much easier to continue following the same course. For generations, steady state continuity delivered retail trading performance that was good enough. We had economic growth, easy credit and you could open c10% more space annually to drive results. Against that background, the industry gravitated to technocrats as leaders. Steady managers to maintain course and avoid risk.
This market is over and not returning in the foreseeable future. One of the issues we have today is many leaders are simply not equipped to deal with this market. They are unable to deal with change, and manage risk. We are seeing the consequences of this in growing corporate distress. The body language of retail businesses says everything. How do they present themselves to customers? How are they reacting to pressure on their trading economics? Is there any investment going on and to what extent is it really focused on their ability to drive sales?
Onerous costs is code for “we don’t sell enough product”. Optimizing costs is a given in business. Cutting them often is not. Retail needs to get better at retailing. This means better customer engagement and usually, this means people. It means investing in better people too.
Leaders need to truly understand the core strengths of their business. What are its fundamental values and what makes it unique? Core DNA is not defined in head office nor even in stores. It’s defined by customers. Strategic plans need to embody this and investment directed at making these traits as strong as possible. Stakeholders need to understand that simply cutting costs will not be enough to survive.
All this is about risk. Ploughing the same furrow is no longer an option – the furrow has gone. You must set your own agenda, often embrace the counter-intuitive, and spend rather than save. You need vision, belief and courage to take your team and colleagues with you. Retail will be a smaller, tighter and less profitable industry but there will certainly be winners able to make very respectable returns. We have a dearth of leaders up to the task but winning will be a prize well worth having.
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