How does a traditional department store retailer like Macy’s take on and compete with the tech titan Amazon? It’s not by trying to catch-up to Amazon’s technology, distribution, and logistics. That would be futile. It is, of course, by creating a compelling experience so consumers want to spend time in stores. But that’s obvious; that’s not a strategy, it’s a requirement.
So what is it that department stores can do to gain some grip again with consumers and stakeholders? It’s not what most would find natural, and it would certainly involve a radical change in mindset.
Department stores rely on brands. Brands rely on department stores. Together they can be very good partners, but for the most part they haven’t been. Many brands, including major ones like Coach, Ralph Lauren, and Michael Kors have gravitated away from and out of the department store channel. That’s entirely due to too much promotional activity driven by the department stores that destroys a brand’s clout and kills its profitability. No consumer covets a brand that’s on sale all the time, and no brand wants to work with a retail partner that loses their money all the time.
So let’s fix that.
Retailers, and especially department stores, would benefit immensely if they focused on building healthy, fast-turning, high margin businesses for the brands they sell. As much as many brands don’t like selling to department stores, they are equally uncertain of working with and selling through Amazon. So use that. Department stores should focus on nurturing brands, not killing them and pushing them away. High-impact retailers should look to turn their consumers AND their brands into raving, raging fans.
Granted this may seem simple, but it’s quite the opposite. One of the hardest things for any legacy business or operator to do is to change mindset. It’s not easy to change teams of buyers at department stores from thinking about how to drive sales regardless of the cost to thinking about how to build high-margin, full-impact businesses that drive raving fans and brands. It’s not easy to convert consumers from “seeking discounts” to “wanting brands”. And it’s not easy to say “let me help you build your business” when you’re used to asking “what margin can you guarantee me”.
Likewise its not easy for wholesale teams and leadership to change their mindset from driving bookings with little regard for what can be consumed to focusing on building upon high-margin net sales that pay the bills and enables investment to grow and innovate. It’s not easy for them to think about their businesses at the consumer level as opposed to the account level. And it’s not easy for wholesalers to strategically plan focused, fast-turning businesses as opposed to jamming in broad assortments of stuff that stunts demand, enables markdowns, and baffles consumers.
Regardless of how difficult all this may be, it is absolutely critical for any retailer or wholesaler looking to keep itself from falling further and further down the slippery slope that’s being created by Amazon. Doing this is absolutely worth the effort. And let’s be clear, wholesale isn’t going away; that’s what doing business with Amazon is. So at the end of the day, the only thing that is truly difficult is continuing to do that which does not work.
Let’s fix this now.
Photo by Macy’s Backstage/facebook