World Retail 2009 Part 1 – The True State of World Retail Revealed!

I love the World Retail Congress. I love it enough to put my business on hold and dig deep into my own pockets to pay for myself to attend. I consider it an investment in thinking. A precious moment to take time out to sharpen my view on the world of retail. Mind you, like all these kinds of conferences, you have to work hard to get the most out of it. This year Barcelona was particularly hard. It started with the opening mood of the conference.

It was attended by a sea of men in dark suits. Dressed appropriately to match their mood. Attendance was dramatically down – less than half the number of delegates from the previous year. A rather telling example of the extreme limitations being put on corporate investment in retail thinking at a time when it is needed most.

And the early theme of the conference?

What else could so occupy the bandwidth of the dark suited, dark mood men?

SURVIVAL!

These people looked like they had been standing in heavy rain for so long they couldn’t lift their heads up to see the sky was clearing and that amongst the showers there were rays of brilliant sunlight breaking through. Many were complaining about foot-traffic. Yet I walked straight out of the conference venue into a sea of people in the streets and shops of Barcelona. In London the same week I witnessed the people cueing on Oxford street for Topshop to open; the hordes of shoppers carrying full bags out of Harrods; the doorman letting two in for two out at the new Hollister store in Westfield London.

Amidst all the fear that the evaporated boom times were no longer handing a free kick to these “retail leaders” who are more business people than true merchants, it was clear that the state of thinking in retail is what is really the issue not the state of the global economy. The very thing that can bring about the renaissance of retail is what is not understood and not being invested in.

Their views betrayed a belief that customer centricity has somehow morphed into the current state of retail somehow being the customer’s fault. “Customers are changing.” “There is no such thing as the average customer any more.” ”They are not spending as willingly as they used to.” “Consumer confidence is down.”

What hit me so dramatically sitting in the audience at this year’s World Retail Congress were Sir Phillip Green’s cheeky comments from his session the year before – “Now we’ll really see who knows their stuff and who’s been pretending all these years.” There was no sense of humor in the early sessions this year and a disappointing sameness to the early tonality and content.

It was very clear from the corridor chatter as well as the stagecraft, that today major global retailers are not run by merchants. They are mostly run by business school graduates – the professional managers. Surprisingly almost all of them that appeared at the conference have attended major business schools in the United States. Listening to them at the World Retail Congress – despite the wonderfully lyrical and divergent accents – you could be forgiven for thinking they all had the same mother. Variation of thought for the professional managers was plus or minus 3 percent from the mean average.

The innovation these retailers relate to – sadly lacking at a global level in 21st century retail – is constrained by culture, core competency, existing capability and risk mitigation as per their business school models. They talk of the need for instilling confidence in their teams, yet none of them appear confident or purposeful themselves about creating a powerful destiny for their retail businesses. They just acknowledge they need one.

They seem incapable of shifting their thinking from an expansionist supply driven era of the 20th century to the demand driven era of the 21st century and what that truly means. They still don’t get that what is happening now has been created by competitive retail business actions and reactions and the de-sensitising of retail businesses as they built bureaucracy instead of flat merchant culture capable of constant and rapid adaptability.

And then Marvin Traub hit the stage.

There is so much truth in the saying wisdom comes with experience. And in retail there is no escaping the people who have grown up in retail and experienced every facet of it from the ground up. It is in their blood and their unconscious competence and common sense oozes from every pore of their skin.

At 83 years young, Marvin Traub rolled pearls of wisdom down every aisle with every sentence he uttered. This is a man from the age of retail that created true retail visionaries and mentored the next generation.

He talked of the Bloomingdales story and how he and his team transformed the organization up until his departure in 1991 from a single New York store to the first national department store chain in America. He talked about cycles and how they come and go – admitting that this one (on a global level) was the most severe he had seen. But most of all he talked about how retail has always and will always need to reinvent and adapt itself. How it is the job of the retailer to excite and seduce the customer to spend. There is no such thing as an average customer and never has been. They are always changing and always have.

That no matter what the state of affairs, confidence, excitement and taking people out of the ordinary and into a world that puts their enjoyment at the centre of it will always sell. And that most of all, at the end of the day, it is all about the product. And it must be differentiated and provide genuine value in the customer’s eyes.

Just like an alcoholic who can’t be cured before he admits he’s got a problem, it is time for retail to face facts.

Retail globally over-produces sameness and ordinariness and the customer doesn’t want it anymore – no matter how cheap we make it. In fact the cheaper we make it, the less value it has to them. In the 21st century context where sustainability is becoming the crucial problem of our time, over-development of profit through volume is becoming a real issue that must be confronted in retail business evolution.

Retail is driven by businesses and their competitive context not by customers. Yes, ultimately it is the customers who choose if they spend and where they spend. But only within the context that is presented to them.

And they are bored.

In fashion there are really only three major trend consultants that the fashion design world pays attention to. The reason the industry en-masse feeds from the same trends is to reduce seasonal investment risk and to fuel the rapacious growth that requires an expensive store model to support it. The so-called sea of options for the customer is really seen by the customers themselves as a sea of sameness with interpretive variation. And yet the customer really wants to be turned on by newness and is researching and buying more and more online. Or creating the differentiation themselves.

Contemporary retailers are obsessed with transactional thinking and overlook the subtle art of selling which people like Marvin Traub live and breathe.

The current global financial crisis has caused the flow of easy money to dry up in every area of the economy as bankers and financiers lack of confidence has led them to change the rules of credit. This isn’t the first time this has happened and it won’t be the last.

The 1980’s junk bond fueled stock market crash. The 1990’s tech wreck. The 2000’s sub-prime melt-down. Every decade has a cycle created by over-engineered, very dodgy investments that are text-book examples of packaging over substance. Time-bombs that will inevitably explode. Due to the interconnected nature of global markets and the speed and enablement of technology, these types of investment time bombs are only going to get more sophisticated and the surges in the cycles bigger, compounded by governments lack of willingness to legislate against pillar mainstream banks and insurance companies participating in them at the global level.

But through all these periods – despite consumer confidence dipping in response to over-whelming negative media coverage – retail customers continue to spend money and spend it in large doses when they are confronted with real innovation, real differentiation and real excitement.

Marvin Taub reminded me that while retail is a very serious business, at its heart it is about connecting to people and making them feel good about themselves in a way that they want to spend their money. It is about finding and creating the best merchandise range possible and making the customer feel good about buying it. Seduction. A sense of humour. Witty banter. Great product. Wonderful stories.

Marvin Traub, Sir Phillip Green and all the presenters who stand out at the World Retail Congress every year do so because they understand that the art of the not-so-serious is what separates winners from losers in the serious times of never ending global retail change.