Why ‘Retail Paradox’?
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Originally run August 7, 2007
Welcome to the inaugural edition of Retail Paradox, where we’ll explore the difficult choices faced by retailers and their partners in the 21st century. This weekly newsletter is brought to you by RSR Research, the only research firm run by retailers for the retail industry. We hope you’ll find our articles relevant, informative, edgy, and provocative. Our goal is simple, but ambitious: we want to identify and articulate processes and technologies retailers need to improve their business and give clear and concise examples of how retail winners do just that.
On the surface, this seems quite straightforward…and it’s easy to pontificate on what retailers should do. Experience shows us otherwise: retailers live in a world of paradox, and breaking this paradox has become the vision quest for retailers both extraordinarily large, and microscopically small.
Paradox #1 – The customer is King, but Wall Street is God. How does a retailer please its customers while pleasing “the Street ” at the same time? Wall Street expects square footage, gross margin and comparable store sales growth. Customers expect an intimate, unique, and satisfying experience.
Paradox #2 – Global supply is expected to fulfill local demand. Retailers are expected to understand and “divine ” demand on an excruciatingly granular level, even as they source their merchandise from half‐way around the world. Local demand implies small lots, delivered frequently based on need, but global supply seems to imply large lots and long lead time, delivered based on the economics of freight.
Paradox #3 – Improve customer service but keep costs low. The customer has learned to speak quite loudly. Retailer service levels hover at the “Mendoza line ” of adequacy, and many retailers have cut their staff levels too lean to provide any kind acceptable customer service. The intractable problem of employee turnover contributes to indifferent service, and most retailers have begun to recognize that self‐service is not a proxy for customer service. It may be acceptable to a portion of the population, but is certainly not acceptable to the majority. Yet these same retailers are under serious pressure from shareholders to keep their costs down.
Other paradoxes abound, and we’ll highlight them for you as they arise. More importantly, we’ll highlight how Retail Winners have found ways to solve their conundrums. Our articles will be informed by three things: benchmark data that highlights the opportunities and enabling technologies retail winners use to overcome the challenges they face, case studies that talk about how they did it, and finally our years of experience, that help us separate the wheat from the chaff, and the hype from the reality of the retailer’s world.
We hope you enjoy our work, and that we can collectively serve the industry that’s nurtured us throughout our careers. Feel free to pass a copy of these newsletters on to your friends. The more the merrier.
Editor’s Note for 2017: I think it’s fair to say we’ve seen new paradoxes hit the retail world in the past decade. For one (the elephant in the room!), how is it that a retailer that makes virtually no profit on its retail operations has a) disrupted the industry and b) has seen its stock price break $1,000 per share? Welcome to the Amazon.com world.
There are many more, but this is where we started, and I hope the history lesson is useful!