Why read this?
Gain a new perspective on why the retail industry is so volatile right now, and what we should do about it.
It will be fun. Promise.
I was inspired to cover this topic when I learned the latest CEO of Away was stepping down after less than a year. Stuart Haselden was hired from Lululemon, a successful, well-established retail brand.
I think we’re going to see this trend accelerate as young brands attempt to scale and legacy brands struggle to maintain scale. The following explains why, and provides some thoughts on how you can position yourself in this environment.
Struggling In The Post-TOGU Era
TOGU = traffic only goes up. An analogue to SOGU—stocks only go up.
From 1985 or so through the great recession in 2008, retail foot traffic only went up. Traffic started to fall off after the great recession, especially in malls, but it would be several years until the declines rendered the average retail store P&L unprofitable.
From around 2010 through 2018, organic or low-cost internet traffic only went up. In the beginning, this was due to an acceleration of people adopting online shopping, getting connected to the internet, buying mobile phones and generally spending time online.
Then the low-cost traffic bonanza was supported by social networks like Facebook giving away underpriced impressions to drive both user acquisition and publisher adoption. Several media companies rapidly rose and fell on this wave.
If you’re fortunate enough to look through the web analytics history of an eCommerce store operating from the early-to-mid 2010’s through today, you’ll see the volume and number of organic referrals taper off year after year. If the brand failed to invest aggressively in SEO, you’ll see organic search taper off too.
When Traffic Only Goes Up, your job as a retailer is to plant yourself in the middle of that traffic and optimize your assortment to capture as much of the traffic stream as possible.
The glory of exploiting mid-90’s mall anchor traffic arbitrage.
You are a bear searching for a good spot near the river so you can pluck spawning salmon out of the water. Most of today’s Fortune 500 retail executive candidates have spent their entire careers as this bear.
In the post-TOGU era, the river has become a babbling brook and many salmon have opted out spawning in favor of scrolling through Instagram. So the bear needs to make a major behavioral adaptation or it will die.
Sad bear needs to eat!
To put it more plainly, a retailer must now generate their own traffic to survive. This requires a completely new set of core competencies that are alien to the way most retailers operate.
Trash bear knows how to make his own luck (traffic).
We’ve reached an inflection point where much of the retail leadership pipeline built up over the past two decades cannot navigate this environment successfully.
Why Executive Turnover Will Continue To Accelerate
When you’ve spent the majority of your career in a field where the pie is growing due to macro factors, it’s easy to assume that everything you’re doing is effective. This is why a lot of “sad bears” wander in circles around their favorite fishing spots instead of setting out to investigate where the F all the salmon have gone.
There are three types of brands in retail today:
Brands that are failing/trending down
Brands that are growing, but don’t know why
Brands that are growing, know why, and are making decisions to accelerate that growth
Number two can very quickly become number one. They’re living on borrowed time.
Away is also a frightening example of how number three can become number one due to what I like to call “six sigma bullshit” aka “the accelerating pace of change in these uncertain times”.
The Away story highlights a glaring weakness in today’s retail leadership pipeline: we have sharp operators who understand the post-TOGU landscape, and we have seasoned and polished C-level people, but the overlap between those two groups is very small.
In a world of six sigma bullshit, we need both. We need the trash bear. And that person is in short supply.
Steph Korey was Away’s sharp operator, but the toxic environment she created was the hallmark of someone completely out of her depth. Haselden was the polished executive who spent most of his career riding a rocket ship, never looking closely at the true drivers of his employer’s success.
Neither of them was both willing and able to lead what was once a well-positioned brand to profitability in the volatile post-TOGU landscape.
How We Have Played Ourselves
Let’s take a break from dunking on the sad bear for a moment and focus on how these changes have impacted those at the start of their careers.
When retail was still a stable, thriving industry, many large companies invested in training and rotational programs for entry level employees. These programs would cycle new grads through 6-12 month stints in functions like merchandising, planning and product development.
The Gap rotational program has many notable alumni and is still famous in the industry. Macy’s has one too. Both are now on shaky financial footing.
Structured rotational programs teach skills, but they also impart the company’s philosophy on “how we understand the business and how that makes us uniquely successful.”
I can tell you from first hand experience—when things hit the fan financially (2008), paid internship programs and true entry level roles are two of the first things to go.
Training for eCommerce today is completely technical and tactical—how to crush email marketing, Facebook Ads Manager, etc.
eCommerce, as a discipline, outsourced its training budget to internet gurus and to the platform providers themselves. In this way, big tech is “managing” these businesses by managing the skills and talent pipeline.
The net result is that retail businesses become less and less differentiated, which hastens their decline.
Today’s eCommerce “rotational program” is mercenary job hopping until one is able to land a position at a growing company with a living wage. Talented people easily jump ship to other industries, agencies, or even the platform providers themselves. Really talented people start their own businesses; the barriers to entry have never been lower.
This is great for individuals, but bad for the retail industry as a whole, especially now that eCommerce has become so critical to the survival of so many brands and retailers.
You Must Become The Trash Bear
I hope that you see yourself in what I wrote above, be you a business owner struggling with digital transformation, a sad bear or a frustrated early-to-mid-career professional.
My perspective is that we all have two options: only work at successful, growing companies (good luck with that!) or build a comprehensive understanding of how customers, products and communications channels interact.
To do that, marketers, merchants, financial planners and tech folks all need to become more cross functional. When traffic is no longer guaranteed, the stakes are higher. You need to understand how your decisions impact everyone else’s decisions.
This is where startups and DTC brands are gaining a major advantage over incumbents. When brand awareness, budgets and margin for error are low, it forces you to really take stock of what activities make a meaningful contribution to sustaining and growing the business.
If incumbents want to survive long enough to remain incumbents, they need to encourage employees to become more cross-functional. And unless there are incentives for thinking and acting cross-functionally, no one is going to do it.
A great way to do this—revive the rotation program model with an eCommerce lens. Give new grads six month tours of UX, web merchandising, digital marketing and even warehouse operations. And design the program so that it gives warehouse and retail employees an opportunity to take part.
That’s a long term plan. In the short term, if institutional money wants to find people to lead brands like Away effectively, they’re going to need to stop pattern matching and start hunting for trash bears.
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