May 7, 2012
Innovations Aren’t Us
Innovation Insights
One of a series by Ken Tencer, Spyder Works CEO
The Merriam-Webster dictionary defines “retail” as, “to sell in small quantities directly to the ultimate consumer.”
The dictionary doesn’t stipulate the size of the store, or even that you need a physical store at all. And this something that many “big box” retailers missed. They were operating on the “If you build it they will come” mentality, which worked for a while – but now it’s not. Last year, sales and profits declined at Toys R Us; Best Buy is closing 50 stores following a fourth-quarter loss of $1.7 billion; and even Walmart performed below analysts’ expectations last year.
The problem: many of these companies have underestimated the changes happening around them. Or as a true student of innovation might put it, they’ve been afraid to make their physical stores obsolete, and now they’re being forced to play catch-up.
If your business doesn’t try hard to make its processes obsolete, someone else will. Businesses, brands, business models and platforms all evolve – creating a need for continuous innovation. In big retail, innovation must focus on developing the right mix of platforms – bigger stores, smaller stores, kiosks, and digital storefronts that you access through your computer, tablet or smart phone – all enhanced by value-added services, education, and the building of dedicated “communities” of engaged customers and other stakeholders.
Can Toys R Us, Sears and Best Buy remain in “retail”? Yes. If, as with any good brand, they develop the right brand platform and a clear brand promise to the customer that differentiates, simplifies and builds trust.
Ten years ago Walmart was supposed to take over the retail world. Now, the Beast of Bentonville is starting to show stress fractures, and online retailer Amazon, with a net sales increase of 40% in 2011, is the new world beater. It’s time for the chains to focus less on what other retailers are doing, and more on what they are not doing: not clearly defining and supporting a customer value proposition.
Toys R Us, for instance, needs to revisit its value proposition and reimagine what it can do for consumers. Can and should it continue to bring toys and baby stuff together (to address the child lifecycle under one roof)? If it’s going to continue selling safety gates and other child-security accessories, should it also provide seminars on child safety, child care, or learning and development? Maybe it can convert some of its surplus space to indoor play areas and party rooms to promote children’s exercise and health. (Maybe it could even host baby showers!)
There is no shortage of innovation opportunities and possibilities. But nothing starts without a vision and a clear commitment to the customer.
