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| The geeks are eating our lunch |
   
Posted Date: 29/01/2012
By Dennis Price
What is retailing?
Specifically, do you know the definition of retailing?
Does it matter if you can’t define retail?
Why do so many practitioners have so little time for ‘science’ and the ‘academia when retail is a multi-disciplinary activity (art and science) as Jon Bird argued last week?
I fully expect to be castigated for being too theoretical – or to be ignored; but I care deeply about this so I will risk it. If you are patient, I hope to convince you of an exciting alternative that would have many practical benefits for your retail strategy.
People easily dismiss something as theoretical, as if theoretical is the opposite of practical or useful. A theoretical approach and a practical approach may well arrive at the same conclusion, The difference is that the practical approach may well cost more in time and resources and the theoretical approach is quicker, albeit unproven and therefore more risky.
When time is short and the capital to experiment with trial and error is limited, will you concede that there is some merit in occasionally adopting a theoretical approach?
In this article I want to define what is retailing, and then:
· Explain how one can (for example) think conceptually and theoretically about retail.
· Explain how this can lead to practical outcomes and decisions.
· Prove that we are not doing it.
· Argue that unless we start thinking smarter about the business we are in we will continue to suffer and that as an industry we need to work harder to infuse the industry with fresh, smart thinkers.
Let us consider some of the attempts to describe what retailing is:
From Wikipedia: Retail comes from the Old French word tailer (compare modern French retailler), which means "to cut off, clip, pare, divide" in terms of tailoring (1365). It was first recorded as a noun with the meaning of a "sale in small quantities" in 1433 (from the Middle French retail, "piece cut off, shred, scrap, paring").
From About.com: Retail is the sale of goods to end users, not for resale, but for use and consumption by the purchaser. The retail transaction is at the end of the supply chain.
From these ‘theoretical’ definitions we can make the following observations – all of which have practical implications:
· Breaking bulk.
· Customisation.
· Small quantities.
· Direct to consumer.
· For personal use.
· Final link in supply chain.
These attributes or features of retailing are of such importance that it effectively constitutes the definition of retailing.
It is also worth noting that there is no reference to ‘shops’ – or ‘place’ of any kind - in either definition.
If you now consider some of the things that are happening in the market place and how these trends are changing retail; it can be done with reference to those key attributes.
Let us consider just one (because of space constraints) of these activities:
Bulk breaking
· Is bulk breaking changing in any way? (When/ where/ why it happens.)
· What are customer expectations about bulk breaking and is that changing?
· Are there new ways?
· Are there new players?
· How is the move to increasingly provide ‘services’ changing this?
· What infrastructure is required/ will change in the future?
· How does it affect or systems/ staff/ strategy?
· How is it affecting the balance of power in the supply chain?
· Is there a way to do it better’/faster/ cheaper?
· Etcetera…
Is there any benefit to this theoretical analysis of retail fundamentals?
Consider this example:
Drop-shipping emerged some years ago as a new, viable business model because of the internet.
Someone thought about the supply chain and how they could wipe costs from the supply chain by doing away with bulk-breaking all together.
They argued that it is inefficient for the manufacturer to go through the process of bundling products for transportation to the retailer (with the concomitant costs) only for the retailer to reverse the process.
The retailer simply had to leverage the relationship with the final consumer (make a transaction) and the product is shipped directly from source.
How clever is that?
The first people to trial drop-shipping may have simply had a brain-wave and tried it. Or it could have been a computer geek thinking abstractly about how products are moved in the retail supply chain.
If bulk breaking is such an important activity that it actually defines what retailing actually is, how do you measure success in this activity?
If it is that important, then you should have a metric for it, right?
The answer is of course: stock turn – or some variation of it. In my experience few people know for sure what their stockturns are by category at the very present moment. In larger organisations a head office buyer may know but the person tasked with turning the stock over (breaking bulk) doesn’t know and most smaller/ independent business owners are too busy with ‘other things’.
I hope you agree that this is untenable? If it is the activity that defines what we do, but we don’t keep score, we deserve to fail. (You can find some typical stockturns for various categories on my website here.)
Practitioners are too quick to dismiss the value of the scientific approach. But if you are going to teach someone about retailing, is it better to get them to learn about how to cash up, how to take stock or how to dress a mannequin, OR should we focus on teaching them think about the definition of retailing – scientifically and strategically? Dare I say it, academically?
It stands to reason that staff should know how to sell and how to build a display. (We earn our living training clients’ employees that.) But there is also a time and place where the leaders of retail should engage with some of the fundamentals at a more conceptual level, because the nature, the scope and the forces of change that we are dealing with right now demands the brightest people apply themselves with some vigour.
We need to attract smart people into the industry. The retail industry deserves its fair share of ‘rocket scientists’ – because let’s face it, the people who are eating our lunch are the geeks.
Not Steve Jobs, nor Jeff Bezos nor Tony Hsieh had an ounce of practical retail experience. But they thought about the market, the supply chain and the opportunities with a mindset unencumbered by ‘experience’.
Ruslan Kogan was as an IT/management consultant - although his first job (aged ten) was by definition retail; he found lost golf balls, cleaned them, repackaged them, and sold them to golfers.
All the big, experienced retailers are playing catch-up with e-Commerce. So much for experience.
The solution I am offering here is not about ‘bulk-breaking’ per se – that is just an example, and it is not about the definition of retailing – that is just the principle.
This post is about the strategic, intellectual engagement with the RETAILING – and that we must apply our minds at the conceptual level to get real, practical results. And that will only happen when we stop confusing our pre-conceived ideas with experience, and if we can infuse the industry with some fresh, smart thinking.
This is not an appeal to be more academic in your approach, but to make room for unproven (theoretical) ideas as well as the proven, practical ones.
Have fun!
Dennis
Dr Dennis Price consultants to and trains the retail supply chain to (re-)capture their entrepreneurial mojo with the right skills, strategies and systems to grow a sustainable business.
Post Script: In last week’s column a few readers disagreed with central idea of that article. (When they sign off ‘annoyed’ or ‘rubbish’ is the first word in the comment, they presumably disagree a lot.) It is not appropriate to take up space in this trade publication about an alternative approach those commenters may have followed when faced with advice they don’t agree with. But you should probably read my response (The Only Advice You Will Ever Need) before or after reading the advice contained in this article – in case you think the strategy I recommend is too academic.) |
Tuesday, January 31, 2012 by Tim S
The retailer that I'm with is a quite successful corporate.
I've been involved in a range of business units and helped to turn-around more than a couple. What I would add is that even a successful business that is not using some flavour of applied science to look beyond current success, toward their next challenges and their next opportunities, is driving with their eyes closed.
Monday, January 30, 2012 by Dennis
Tim - and I am guessing the business is successful?
Monday, January 30, 2012 by Tim S
Have to once again agree with you Dennis.
I've been in the retail industry for over 20 years and am constantly amazed at owners and managers that do no comprehend the many ways that their own businesses generate value.
The science of retail (logistics, financial management, market intelligence, economics, etc.) is where we draw inspiration and importantly seperate the crap from the cream in terms of our performance and innovation.
Monday, January 30, 2012 by dennis
Online retail being retail is not quite the revelation I intended to communicate. I was going for the idea that if we engaged conceptually with retailing as a science, like the geeks do/did - we may see different opportunities. Hoor that helps you
Sunday, January 29, 2012 by luke r
ummmmm.....everyone considers online retail to be retail?! Is this article supposed to be some sort of revelation?
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