Published on: June 30, 2016
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Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.
The Wall Street Journal had a story the other day about how some retailers are taking a new approach to inventory. The radical thinking seems to be that "less is more."
Home Depot is one of the companies cited in the piece, with management saying that rather than having floor-to-ceiling displays of merchandise, the idea is to have less stuff, but all of it within the shopper's reach.
Walmart and Target also are mentioned in the story, which says that they simply want to have less inventory - just what they need to have, when they need to have it. Walmart has even widened its aisles to make it harder to have more inventory.
The financial calculation, put put it in terms that even I can understand, is that by having less inventory - but the right inventory - chains will be able to grow sales while keeping their cost of goods flat or even lower. I'm not sure, but this sounds to me a lot like this thing called ECR - Efficient Consumer Response - which consultants created and retailers embraced back in the Jurassic era as a way for supermarkets to try to compete with a newly aggressive (and, at the time, almost stealth) Walmart on costs.
If there is a reason that ECR didn't have the kind of industry staying power that some would have hoped, it may be because most companies forgot about the "consumer" part of it. They were pretty good at efficiency, but they looked for efficiencies in their own supply chains, but often ignored what consumers needed and wanted. The sad but unavoidable truth is that consumers don't always do what retailers and suppliers want them to do. You can use algorithms to analyze their behavior and react to it, but they are not so successful at forcing shoppers to behave one way or another.
I've always had to chuckle at all this stuff because, after all, I've spent most of the past three decades doing a large percentage of my shopping at Stew Leonard's - an independent retailer that generally has stocked something like 2,000 items, and that reportedly did about $2 million a week out of the store that I patronized. Most of the items are fresh, and a large percentage are private label. The thing is, I think they figured this all out because they started by carrying just a dozen items or so, and grew slowly and organically, carrying what they knew consumers would respond to. There never was any delusion that they could be all things to all people, or that people wouldn't have to shop elsewhere for the things they did not have. But there was utter certainty about what its retail experience was all about, and that certainty has seen the company through good times and bad, and Stew Leonard's remains a vital retail entity that tells a compelling story from the moment you walk in the front door, and they collect your money for the privilege on the way out.
The key - and this is most assuredly not rocket science - is having that kind of feel for the shopper, and an extremely strong sense of what your retail brand is. I would never argue that everybody should be like Stew Leonard's ... but I would argue that the way to success is not by simply saying "let's cut inventory," because that's more like a "strategy-of-the-month approach. Tell me the truth: having read about the less-inventory approach in the Journal this week, would you be surprised or shocked if a year from now the Journal has a story about how these same chains are adopting a more-inventory approach?
Of course not. Because at the end of the day, these companies are looking to solve a wide variety of problems - like the growing market share enjoyed by online competitors - by adopting strategic and tactical approaches that have been crafted out of a desire to be strategic and/or tactical. Not necessarily by an intimate, instinctive understanding of the shopper. They lurch from strategy to strategy because they're trying to find an answer, not because they've said to themselves, "we know who we are, we know who our shopper is, and we know how our differences can make a difference in their lives."
And that's the key. At least that's what I think.
There always are going to be cool and innovative ideas, and I'm a big fan of embracing them. Hell, MNB exists because I think that it is important not just to identify them early, but also put them in context.
At the FMI conference last week, Nadia Shouraboura, founder and CEO of Hointer, talked about her company's efforts to bring a low inventory approach and a retail environment that relies on robotics to a wider number of retail venues. I'm a big fan of Hointer . in fact, I was writing about the business here on MNB more than three years ago. When I went to visit its store last time I was in Seattle, it had been closed down ... I suspect the "retail consultancy" part of the business simply is more lucrative than the "retail" part. That was my argument three years ago - that while Hointer was in the business of selling jeans, it really was in the business of selling technology.
By the way, I'm not denigrating Hointer. Not at all. I think it is a really cool idea. But I do think that there will be some retailers that will look at what it offers and think that it is a magic key that will unlock the future for them, as opposed to seeing it simply as a tool with which they can advance their central argument about why they are relevant to the shopper.
If you don't know that, and if that knowledge has not seeped into every level of your organization - the way it has at retailers that range from Wegmans to WinCo, from Dorothy Lane to HEB, to name just a few - then all the Journal pronouncements and consultant-driven strategies in the world can't help you.
Anyway, that's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.
- KC's View: