, November 5th, 2009
Last May, calamity struck the well-loved Texas retailer Jim McIngvale (“Mattress Mack”) of Gallery Furniture: arson damaged his showroom and destroyed his main warehouse. A hundred thousand square feet burned, causing more than $20M in damages.
While not ravaged by literal fire, the U.S. economy faced its own overwhelming challenges last year as millions of jobs were lost, banks collapsed, and the credit market froze. Retailers were hard hit when their customers padlocked their wallets and hunkered down to wait out the economic storm. Many stores closed their doors, permanently.
Mattress Mack refused to shutter his doors, opening a renovated and restored warehouse and showroom just 44 days after the catastrophe. Like Gallery Furniture, U.S. retailers are starting to see advances after a long, hard year. Rising from the ashes as the holiday season approaches, store owners are realizing that the retail landscape has changed dramatically. New tactics are needed to woo customers who don’t shop the same way as they did before the recession.
Those new tactics were the topic of the 2009 Retailing Summit, hosted by Mays Business School’s Center for Retailing Studies, held October 1 and 2 in Dallas. More than 200 people from 62 organizations involved with retailing congregated at the Westin Galleria to network and hear speakers present on the timely theme “Moving forward: innovation and discovery to survive, evolve, and thrive.”
Presenters included presidents and CEOs of major brands such as Home Depot, Nieman Marcus, Olive Garden, and Office Max, as well as authors, analysts, and researchers. Attendees took home valuable lessons about how to improve their business during the recessionâ€”and encouragement that there are sunny days ahead in the economic forecast.
“This past year in retail has been like the Mountain Ride at Disney: exhilarating, unpredictable with many twists and turns.”
— Gayle Tremblay, Vice President of Neiman Marcus’ Last Call Stores
Green is good, family is great
Each presenter confirmed that the retailing industry is undergoing a fundamental change. From her position as vice president of Neiman Marcus’ Last Call Stores, summit presenter Gayle Tremblay observes that consumers, even luxury consumers, have a new relationship with money: they are more mindful of their spending in an uncertain future. Retailers will have to stay laser-focused on customer needs and be flexible, she said. What are her customers looking for? She says that family values and eco-friendly initiatives are generating sales currently.
What’s not working in retail? Shopping malls. That’s the conclusion of presenter Michael Exstein, a senior retail analyst at Credit Suisse. With his Wall Street analyst no-holds barred delivery, Exstein said that the business model of malls is no longer viable. There are too many of them and they are too dependent on the productivity of anchor stores. He foresees further consolidation in the retail sector as more and more shopping is done on-line rather than on-site.
But Exstein isn’t down on retail. “Retail is a wonderful business. Fast changing. Exciting. Cyclical,” he says. As for the financial outlook, Exstein sees modest recovery in the fourth quarter of this year. His recommendations to retailers included store regeneration instead of building new stores; looking for opportunities in middle markets (between low end and luxury); and trumpeting sustainability efforts. There is an overwhelming desire on the part of consumers to hear companies talk about sustainability, so retailers must communicate about their green initiatives, he says.
The Home Depot CEO Frank Blake echoed the sentiment that growth will come from existing stores, and he plans to invest in his stores by investing in his people and merchandise. In a casual interview, Blake said his leadership vision places the CEO at the bottom of an inverted pyramid. It’s the people who work in the stores who have the greatest impact on their brand, profit, and business success, he says. To rebuild customer trust, Blake is redirecting the chain’s strategy to emphasize speed, simplicity and customer service that enables “more saving, more doing.” For his female customers, who make up a surprising 49% of shoppers, new lines like Martha Stewart will offer stylishly designed products that make the warehouse environment more welcoming, while expanding the DIY chain into new business categories.
Brand = promise to serve
After all of the shake up of the recession, companies need to reinforce their brands, especially if the brand has been repositioned due to the economy. Stan Richards, founder and leader of the Dallas-based Richards Group advertising agency, advised the audience about his Sphericalâ„¢ branding technique. With spherical branding, the brand is implemented at every contact point. Relationship marketing, public relations, even the company’s internal communicationsâ€”their messages must all be integrated with the brand, he says.
The first step to making that happen is to clearly define the business, as well as the brand’s positioning, personality, and imagery or logos. Those branding strategies guide the development of communication plans for each point of customer contact, with the result being a brand that lasts longer than the average company CEO (three years) or marketing officer (less than two years). Clearly identifying the brand vision for internal audiences is as important as external communication, says Richards.
He should know: his company is responsible for highly memorable brand campaigns such as Chick-fil-A’s “Eat mor chikin,” Motel 6’s “We’ll leave the light on for you,” and Fruit of the Loom’s Fruit Guys.
“If a brand promise has easy substitutes among competitors, then the brand is a commodity. Great brands must have a compelling, unique promise, emotional connection, and align and direct the organization’s every decision.”
— Dave Pickens, President, Olive Garden Restaurants
Dave Pickins, president of Olive Garden Restaurants also spoke about brand management, and the unique promise an organization makes through a brand.
“If a brand promise has easy substitutes among competitors, then the brand is a commodity,” that is, a good that anybody can produce without differentiation across the market. “Great brands must have a compelling, unique promise, emotional connection, and align and direct the organization’s every decision,” says Pickins. A brand should differentiate a company from its competitors so that consumers understand the product or service is something you can’t get anywhere else. When you achieve that level of brand loyalty, your customers become apostles for the brand.
Where does a brand come from? Your brand and its promise must be based on inspired consumer insight, says Pickins. For Olive Garden, the brand is all about an idealized Italian family meal. The American public laments the loss of family time he says, so Olive Garden taps into that longing with an emotional connection: shared salad and breadsticks around the table and a boisterous environment make it more like a meal with extended family at home. Employees’ warm and caring demeanor feeds this brand as well. Across all customer touch points, their brand message “When you’re here, you’re family” is repeated.
“The real from the genuine, not the fake from some phony”
Today’s consumers are interested in real experiences and lasting products, says James Gilmore, author of Authenticity: What consumers really want. In an ever more commercialized, intentionally staged, and technologically mediated worldâ€”an increasingly unreal worldâ€”people want the real from the genuine, not the fake from some phony, says Gilmore. His advice to retailers is to think about experiential ways to improve business by focusing on how you do things rather than what you do. Retailers must engage the consumer’s five senses and create a unique, memorable, real experience.
On a related note, Leonard Berry, Distinguished Professor of Marketing at A&M, suggested that retailers take a lesson from the Mayo Clinic, which is known for it’s high level of customer service and satisfaction. Berry says retailers must manage the three types of clues sensed by consumers which determine the experience: functional clues (technical qualityâ€”the product does what it’s meant to do); mechanic clues (tangible and sensory elements, such as cleanliness or store layout); and humanic clues (personal interactions).
At the Mayo Clinic, respect for the patient is one of the highest priorities. That is something vital that is missing from retail today, Berry says. Retailers must value a customer’s presence, time, privacy, self-esteem, and voice if they want to provide truly great service.
“Advertising is the tax you pay for being unremarkable.”
— Robert Stephens, Chief Geek and founder of The Geek Squad
One other thing sets the Mayo Clinic apart: they don’t advertise. Their brand reputation of quality is so strong, they don’t need to. Retailers often have fantastic advertising and horrible customer service, says Berry, and that disconnect is what’s wrong with retail in America today. Retailers must define what great service looks like in their organization, then “major in the minors” by paying attention to all of the details that effect the customer experience.
Sam Duncan, CEO of OfficeMax, argues that something else is wrong in corporate America today, and that is a lack of integrity. His path to the corner office began bagging groceries at Albertson’s. As he moved up through the ranks, he infused the companies he led with his personal values including integrity, accountability, teamwork and trust. He says employees must think about the company and customers first, while applying focus, energy and discipline to all they do. To the students in the audience, Duncan provided a model of servant leadership, where success is defined not by multi-million dollar compensation packages but by “being honest, even when it hurts.”
In addition to the keynote presenters, summit participants shared ideas during break-out sessions and round table discussions on topics such as customer experience; going green and brand image; lessons from the last recession; new retail business models; and best practices in multi-channel marketing, among others.
Rising from the ashes
More than 200 people from 62 organizations involved with retailing congregated at the Westin Galleria to network and hear speakers present on the timely theme “Moving forward: innovation and discovery to survive, evolve, and thrive.”
Jim McIngvale’s story of triumph after tragedy at Gallery Furniture was the high point of the summit for many attendees. One participant said she found his presentation “inspirational and motivating,” as he shared details about how his company has flourished thanks to a corporate culture built on a “never give up” work ethic, and a local community that supported his business in crisis. “Not everyone has a literal fire occur, but we all have met with some overwhelming challenges,” said the participant.
The theme of the summit was that the same principals of perseverance and determination McIngvale shared must be implemented by all retailers in this changing and challenging economy if they are to emerge more vibrant and profitable than ever when the recession is over.
Plans for the fall 2010 Retailing Summit are underway.