Published on: December 6, 2011by Michael Sansolo
There’s an old axiom that generals always fight the last war just as economists always battle the previous recession. The problem in both cases is that the past is gone and the new challenges of the day require a completely new approach, usually one that flies in the face of past experiences.
So, beyond hoping that some economist has finally figured out a new approach to the current economic situation, let’s consider one of the lead stories from Monday’s edition of MNB: Walmart’s developing strategy for the end of the big box era. And let’s recognize that the folks in Bentonville are doing exactly what they must by walking past the very formula that fueled one of the greatest growth stories in the history of business.
It’s not like they haven’t done this before. It’s been only 20 years since Walmart, then just recently crowned as the largest mass merchandiser in the US, jumped into selling food. I remember the scorn that greeted that move. There were countless voices claiming that Walmart didn’t understand the challenges in selling produce, meat and all other supermarket products and therefore they were doomed to fail. The transition wasn’t easy, but I’m betting Walmart would take a repeat of that success in a heartbeat.
Hopefully, everyone else has learned that a careful departure from your past success is critical to future growth. It’s all about changing and evolving, not willy-nilly flights into businesses that you don’t understand. (Yesterday’s MNB also had a story about the on-going struggles at Carrefour. Let’s remember that around the time Walmart jumped into food, Carrefour and other European hypermarket operators tried unsuccessfully to invade the US market. Not every experiment is a good idea.)
Against that backdrop, I got an interesting note from my former FMI colleague Anne Marie Roerick down in Texas, where that’s state’s dominant retailer, HEB, is quietly moving into new territory. For the second straight holiday season HEB has jumped into the toy business. No, HEB hasn’t simply loaded up on seasonal specials in a grocery aisle. Instead, HEB is running three seasonal stores that are all about toys.
“We’re always trying to innovate around retail to see what we can do that’s different and better and that better serves our customers,” HEB spokeswoman Dya Campos told the San Antonio Express-News. And Campos made it clear that the program is only growing. HEB, she said, will try “different things to make access point more convenient for our customers.” That may explain why HEB Toyland is in two malls and one outlet center this year after having just two stores last year.
It’s easy to make a simple case why HEB’s Toyland is both a great and a bad idea. Sure it builds on a towering brand, especially in Texas, but then again, do shoppers really want to buy Legos from their favorite supermarket? Honestly, we have no way of knowing. If successful experiments brought guaranteed results we’d all be getting food from Webvan these days.
For every really good idea there are countless in the trash heap. The only real guarantee is that you can’t sit still and look to the past because that’s not where the changes come from. Two years from now, Walmart may be back to building big box stores or HEB may be trying to move unsold toy inventory. Or both might be reaping huge gains from these gambles. That’s why you have to ask yourself where should I go next?
One last thought on innovation and meeting changing consumer needs: We have an almost non-stop discussion at MNB about the power of new technology. Sometimes that opens up unexpected business opportunities. For example... on Amazon.com right now there are nearly 4,000 product suggestions for winter gloves made for iPhone users, so that people can work a touch screen while keeping their digits warm. (These gloves feature a conductive threading on the index finger and thumb.)
No one knows what opportunity tomorrow will bring.
Michael Sansolo can be reached via email at email@example.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
- KC's View:
Michael raises an interesting point that made be think about a story that I saw yesterday in International Supermarket News, which said that “the increasingly fraught battle between Tesco and its competitors will be laid bare this week when the supermarket giant unveils a fourth quarter of declining sales across its UK stores. The sinking sales among the 2,500 British supermarkets and convenience stores will no doubt cast a gloomy shadow over Tesco’s more solid performance in the expanding overseas markets.
“The UK-based retailer has suffered more than its closest rivals in the recession, partly because it sells a greater percentage of non-food goods, at a time when shoppers are tightening their purse strings.”
This report made me wonder that while we all are familiar with the phrase “too big to fail,” perhaps there is a modern retailing corollary - “too big to succeed.” The world’s three biggest retailers, all of which share a global vision, all are facing specific problems that are reflected in recent fiscal problems. Now, some of this no doubt can be traced to the recessionary environment that persists around much of the globe, but it strikes me as at least worth considering that perhaps these companies have overreached, or have become so big that they have become monolithic at a time when greater flexibility and nimbleness are called for.
There are probably all sorts of counter-arguments to this, and I’m not putting this forward as a finished thought. But the news and the troubles have got me thinking.