Brick-and-Mortar retail died last year. Well, traditional Brick-and-Mortar retail died. As soon as the words showrooming and omni-channel became part of the common nomenclature, retail as we knew it was gone.
Some will say that it died with the advent of the internet but that is not true. The wheels were set in motion but most retailers will tell you that they did not believe that the internet would have the impact that it has had. For proof of this statement you only look at the early versions of their websites or the integration of web and in-store inventory.
However, in the last two years ALL retailers have had to re-think their web strategies. The real impetus for this change in thinking has been the explosive growth of mobile. When customers started to use their phones to purchase while inside stores, retailers had to think about how to unite all their channels. If customers were making purchases inside the four walls using their phones their expectations remained that they could pick up their merchandise and head home with it, right then and there. Unfortunately, most retailers’ inventories exist/existed in silos. So the seemingly simple task fulfilling a web or mobile order is/was more complicated than one would think.
The most valuable asset that retailers possess is not the products on their shelves, but the tech-savvy associates on their floors. Competition in the retail space is growing exponentially as each day goes by. Big-box retail locations are searching for answers on how to fight off both opposing storefronts as well as online retailers. Less foot traffic into retail locations means fewer at-bats to close more business. Sales are down and at their worst for retailers since 2008 causing some to call today a Retail Recession. While “show-rooming” is constantly looming in the back of every retail manager’s mind, the experience itself is the real issue that needs to be addressed. If shoppers are constantly walking into brick and mortar locations to see the products for themselves, the opportunity still presents itself for that shopper to become a buyer today and a loyal customer for years to come.
For those of you that do not recognize the name Henny Penny, you may recognize the catch phrase, “The sky is falling! The sky is falling!” It seems that phrase could be the title for copious articles that have been written about retail, specifically Best Buy, since the Larry Downes article came out in Forbes in early January. That article really spurned the conversation about show-rooming and how that was the end of big-box retail.
Now news of Amazon embracing internet sales tax in order to open more distribution centers (DCs) and offer same day delivery has reinvigorated the conversation that big box is near death. First, let me start off by saying I do not believe Amazon opening DCs is about brick-and-mortar retail; it is about finishing off their online competition. Second, the opening of DCs does not finally vanquish the last competitive advantage of brick-and-mortar-retailers. And finally, big box retail as we know it will die. I will address all these points in order in the next few paragraphs.
While there were no Sally Field or Cuba Gooding, Jr., moments last night at the Northern Virginia Technology Council annual Hot Ticket Awards ceremony it was one of the best events I have attended in Startup Land. It was great to see some of the NVTC members let loose, celebrate, and really embrace the Hawaiian Shirt Theme. It was also great to interact with many of the nominated startups and swap stories.
Two companies in particular really stood out to me: ActivityRocket and Votifi. They were nominated in Hottest Startup and Hottest Bootstrap respectively. While neither won, I cannot imagine they both won’t be wildly successful.
And while winning does not insure success it is a great honor and achievement. I am proud to announce that Lemur IMS won Hottest Startup! This award recognizes the “company with the best story and results during the time period of January 1, 2011, to April 30, 2012.” Since I was not able to rush on stage and celebrate like Sally or Cuba I would like to take this moment on behalf of the Lemur IMS team to thank our family, friends, advisers, and mentors.
Overall at the event there were eight winners in eight different categories. We were privileged to be recognized with the other winners: CFN Services, Inc., Sonatype, GetWellNetworks Inc., Near Infinity Corporation, Micromet, BroadSoft, and newBrandAnalytics.
I am sure we all just wanted to get up there, clutch our award (the doppelganger of the People’s choice award), and shout like Sally Field “You like me, you really like me!!”
“Show me the money!” A phrase so powerful it has won Oscars. Now there is a new term out there that is just as powerful but much, much dirtier—Showrooming. The term is used to describe how consumers are more and more using traditional brick-and-mortar locations as a showroom to view/demo a product, compare prices on their smartphone, and leave to make the purchase online.
This concept is getting lots of press lately. Usually it is linked to articles about Best Buy and why the retailer will eventually go out of business. I firmly believe that “showrooming,” if leveraged correctly, can actually help brick and mortar locations. Every person that walks into a location represents a potential sale. Regardless if that consumer is more inclined to buy online or not.
Let’s say Joe Shopper goes into his local electronics store to see a TV that he has recently looked at on Amazon for $1000. If Joe walks into his local electronics store, and that same TV is $975, why wouldn’t Joe buy it right then and there vs. paying a higher price from Amazon? There really isn’t a compelling reason.
Last week JC Penney cut 14% of its staff at HQ. This accounts for 600 of the 4,400 corporate employees. While I do not celebrate the loss of jobs I am encouraged by the reasoning. Simply put Ron Johnson stated that the company goal is “to operate like a start-up.” He wants to remove layers of management and create more accountability. As a CEO of a burgeoning business and a former employee of multiple Fortune 500 companies, I have first hand knowledge of the distinct cultural differences.
What makes startups great is that everyone is accountable to everyone. The success of the enterprise depends on all parts functioning in their role and often times taking on additional responsibilities. This culture leads to a fast paced environment where ideas are easily shared and innovation is rewarded.
During my time as manager for Best Buy, hhgregg, and Bed Bath and Beyond I acquired a unique perspective about large enterprise. I ran stores that did over $50 million a year in revenue and had over 100 employees. In this “Corporate” structure I sat at the top and saw first hand how difficult it was to have innovation bubble from the bottom up and key information disseminate down. Also, at the same time I sat multiple levels down the corporate hierarchy. The same frustrations my sales people felt with me I felt with upper management.
Consequently, we developed systems in my stores that would allow for innovation and accountability (GM Roundtables, weekly supervisor meetings, innovation teams, etc). These platforms allowed for my stores to be at the forefront of retail innovation and created much happier employees and customers. I have taken these principles into Lemur and we are in the process of building a culture based on a Virtuous Teaching Cycle.
Ron Johnson’s goal to operate like a startup is noble one. Six months into the job and he is moving at break neck speed, just like a startup.
Last week when Best Buy announced that it was closing 50 big-box stores, buried in the reports was a more exciting announcement; it was opening 100 smaller and Best Buy Mobile stores. Overall, Best Buy reports that it will be reducing its square footage by 5% while adding stores; as Brian Dunn, CEO, put it, “more doors and less square footage.”
Many believe that this is the first sign of the eventual demise of Best Buy and big box retail. They could not be more wrong. This in fact is proof-positive that retail will re-invent itself to satisfy the needs of the consumer.
JC Penny launches Square Concept
In the last few months, two of the largest retailers made major announcements about their new directions. The first, JC Penney, is attempting to reinvent the department store shopping experience with their new Square concept. Furthermore, its move towards every day “fair and square” pricing is an attempt to remove the noise of the current shopping experience. It is too early to tell how Penney’s new concepts will fair.
The bet is that JC Penney will see this all the way through. Ron Johnson, the new CEO of JC Penney, is known as a great retail visionary and believes in his strategic plan. Johnson was the architect behind the Apple stores. For those of you unfamiliar with the story, the Apple stores were an utter failure coming out of the gate. It was Johnson that insisted that they stay the course and the concept needed time to develop. Johnson understood that this “new” concept of retail would require the customer getting used to it. He also believed that once they did, the Apple stores would be a great success. He was right. Now he is making a similar bet with JC Penney.
SXSW is full or parties and all manners of Geeks, Nerds, Hipsters, Old Money, New Money interacting with each other and grooving to all types of music. At those parties you get what you expect—lots of awkward dancing.
The other part of the SXSW experience that is constant is “The Pitch.” Everyone you meet asks, “In one minute or less, tell us what your startup does.” There are official pitch competitions and if you are lucky enough you get to participate in these sessions, or showcases. Those events are instrumental in the growth of the entrepreneur and the company.
Yesterday we had the unique honor to participate in a company showcase at Startup Village called Entreprelooza SXSW. When we were first asked we were told that this would not be your typical showcase and we need to do an artistic presentation of our company. Thinking this showcase would only be for Entrepreneurs, and not investors, and that it was more for fun—we did not prepare.
Once we arrived at the Village we were told that it was open to the public, that yes, investors would attend, and that we should do our very best. This is what we came up with (See video above). ENJOY!!
If there is any true take away I can give you from SXSW it is this: Just let it happen. All the planning in the world cannot compete with the power of social media and chance.
The power of the truly connected society never ceases to amaze me. Yesterday through a combination of Facebook, SMS, and serendipity, I was able to reconnect with my best friend from kindergarten, Pat Matthews. Pat is now SVP of Rackspace. We had not seen in each other in over 10 years. I have to admit that was the highlight of a very fun and eventful day.
The day started out like every other day this week—rainy. We (Cary Scott and I) were not to be deterred and headed down to the Startup Village. They were having a pitch and trivia competition sponsored by American Airlines. Unfortunately, since there were only 2 of us here representing Lemur IMS we were not able to participate (you needed a minimum of 3). Even though we could not participate we still found the event entertaining.
After spending some time in the Village we headed off to The Rattle Inn. Austin Ventures was having a party there and, funny enough, one of the feature bands was none other than The Lemurs. Needless to say, they rock. At the party we had the privilege of spending time with the AgLocal team. Their team is as cool as the business they are building. Make sure to check them out.
As we were enjoying tasty BBQ near the cell-phone charging area (the most essential part of any SXSW party) we had the pleasure of meeting Lan Nguyen from Klout. This might have been the most serendipitous meeting of all time. No more than two minutes earlier we all had been speaking about our Klout scores and how they were determined. Lan was generous with her knowledge and her passion about Klout was infectious. Although I use Klout, I think the jury is still out. However, if the team is anything like Lan, I cannot help but think it will become ubiquitous.
After leaving the Rattler Inn the day’s pace accelerated. We spent some time in the StumbleUpon lounge (recharging electronics, what else?); Networking at Startup Village; and eating a late lunch. I then headed to Fogo De Chao to meet with Pat Matthews (Cary and Evan Burfield headed to the The Driskill Hotel for a DC Tech Meetup). Seeing Pat brought back memories of playing touch football and thinking “Wow we are going to be the best QB/WR tandem in the history of the NFL.” That never happened but it was good to see that Pat had channeled his competitive spirit towards business and become a great success.
Pat then invited me to the Rackspace party at Bat Bar where I spent some time with Paul Singh of 500 Startups. Paul was kind of enough to share his philosophy on investing, entrepreneurship, and philanthropy. Paul’s unique perspective was inspirational and I am excited to see how he and 500 change the world.
Oh yeah, one last thing of note, we were all able to reconnect with an old friend—the sun. Yes, folks the sun did shine in Austin yesterday both figuratively and literally.