The state of retail: recession or opportunity?

Courtney Dutton, 6 min read

The state of retail: recession or opportunity?

Retail is in recession. David Jones has marked its third year in a row of declining sales, and is cutting 120 jobs as a result. Myer reported a loss of $476 million in 2018. The 2018 Christmas period, the time where the majority of retail businesses make the majority of their money, saw retail spending increase by a meagre 0.2% in November compared to the month before. And it's not limited to Australia - Barney's, New York, despite the many glowing endorsements from Rachel Green and Carrie Bradshaw alike, has filed for Chapter 11 bankruptcy. So, maybe it's time for retail stores to get their affairs in order. Speak to their solicitors, draw up the wills. It's been a good run. Death, after all, is a part of life.


But wait - in the third quarter of 2018, Apple had their most successful June quarter ever, and marked their fourth consecutive quarter of double digit revenue growth. Super Retail Group (which owns Supercheap Auto and rebel Sport, among others) enjoyed an 8.6% growth in net profit in the 2019 financial year. And Journelle, an American lingerie company not only opened its doors in 2007, smack dab in the middle of the GFC, but has thrived through it, with double digit growth throughout the entire recession.


So what does this tell us? That times are simultaneously good and bad? That the success of a business can't be predicted?


Or, can we examine a few key parts of these businesses, in order to discover that perhaps, this isn't all random, that maybe...just maybe...there is some equity in business success.


Let's start with those that are struggling:


"I would have gotten away with it if it wasn't for those meddling kids and their iPhones!" That's what they say. That it's the internet. It's come along, with its infinite selection of products, its one-click-purchase, its discount prices, and taken all the profits right out from under the noses of the hard-done-by retail stores. There's a little problem with this logic, however: it's not just those pesky youths who have iPhones. It's everyone. And we all (even the kids) still shop in physical stores.
Which tells us that even with everything the internet has to offer, physical stores still have something the internet doesn't. And it's got to be good. Because there's no reason to go into a retail store. You can buy everything you could ever need - shelter, food, water, the entire Maslow's hierarchy, online. There is no need to leave the house and yet we still do. The question is: why?


Picture shopping at David Jones in your mind. Now picture shopping at Myer. Was there any difference? What did you picture - a department store? Any distinguishing features? Is there any experience, any feature that you can get there that you can't elsewhere? How does shopping at either make you feel? Good? Bad? Absolutely neutral? Why do you go to a David Jones or a Myer? Because you're already at Westfield. Nothing more, nothing less.


Case study: Apple retail


Now, picture an Apple retail store. You walk in, see those wide open windows. The Genius Bar at the back, the retail assistants at the front, ready for your every need with an iPad in hand, and all that crisp technology laid out in neat categories, waiting for you. Going to an Apple store is an experience.


Counter-intuitively, Apple stores aren't designed to sell. They're designed to delight the customer. Of course, as one of the biggest businesses in the entire world, they're very good at selling. They want your cash, but they're sophisticated, classy. They're here to put you first. And in turn, you put them first by buying each iteration of iPhone and iPad they can throw at you.


Apple stores sell by serving a purpose greater than selling. They're not just stores. They're where you come when you need something fixed. They put on classes. They've got free wifi and as many Genius' as you can poke a stick at, all eager to help you with your cracked screen, your faulty charger, your battery that only lasts an hour. It's humanity first, technology second.


So much so, that Apple retail staff are instructed not to sell. Instead, they're there to solve problems. To turn a bad experience into a good one. People come to the store, they're unhappy. Something is wrong with the technology you've sold them. It's an adversarial situation: unhappy customer who wants their money back versus the store who has that money. But you'd never hear someone describe the Apple atmosphere as adversarial. Or even tense. Or anything besides delightful. Because Apple retail staff aren't taught to short-change the customer. To adamantly defend products, swearing black and blue that all problems are self-induced and I'm sorry, sir, but we have a strict no return, no refunds, no warranties or return of currency at any time, policy. In fact, they trained to do the opposite: to side with the customer. To solve the problem.


Apple employees are thoroughly trained to implement the Acknowledge, Align, Assure ("AAA") approach during every customer interaction. You can read our full discussion of the AAA approach here, but in short, AAA is exactly what it's name describes: when a customer comes to you with a problem, first you Acknowledge that it's a problem, then you align yourself with that customer by demonstrating that you understand their frustration, finally, you assure them that their problem is going to be fixed quicker than the next IOS update is released.


Lesson: Retail stores have to be more than just monuments to consumption. People don't need to go into your store. They can get what you've got online. So you've got to give them a reason to. And what is the one thing that a circuit board and a bunch of 1's and 0's can never emulate? Humanity.


Case study: Journelle


Apple is the big dog. They've got millions, no, billions. Wait- wrong again, they literally have trillions. Maybe they're not the best example. They're too far up, we can't see the sky from beneath their shadow. When you're that big of course you can sell a few phones and laptops in a physical store.


So let's look at a smaller example, one closer to earth: Journelle.


Journelle is an American lingerie store that opened its doors in 2007. Yep, you read that right. Right in the middle of the GFC. The very same GFC that caused small business bankruptcy filings to grow by 33% from 2007 to 2008. Then, for those bankruptcy filings to grow again by another 75% from 2008 to 2009. This is the climate in which Claire Chambers, the CEO, decided to open a lingerie store.
And she did it. Under a seemingly nondescript strategy, to "make women feel amazing every day." She implemented this strategy by stripping away all non-customer facing activities (e.g. inventory counting) from sales staff. This left them with more time assisting customers. Then, when everybody else was reducing their staff numbers, she added more in order to ensure that there were always trained experts on the floor, ready to assist customers with their every need and want. And it's worked: during the recession, Journelle experience double digit growth. From 2011 to 2012, same store sales rose 55%. Journelle thrived when most others couldn't survive.


Case Study: Super Retail Group


This one is closer to home. Australian born, bred, and breaking from the retail mould. And how to do that? By, as their Chief Executive Anthony Heraghty, puts it, "transitioning from a product-oriented to a customer-oriented company."


The specifics of that transition: they've taken note of who their customers are, how they shop, and what they want. They then utilised this knowledge to create value-adding services; they noticed that customers often liked to research online, and buy in-store, so they added click-and-collect functionality. They also invested in their staff training, through a partnership with none other than yours truly - Yarno. SRG rolled out multiple Yarno campaigns across their rebel and Supercheap Auto stores. You can read the full results of Supercheap Auto's first ever Yarno campaign here, but here's a little snap shot: after just one campaign 47% of Supercheap Auto's stores reached their sales targets post-campaign, which amounted to a 30% increase in overall sales for that category.


And it's working out for SRG: by focusing on the customer, their 2019 financial year net profit totalled $152.6 million, a rise of 5% from the year before and their revenue is up 5.4% to 2.71 billion.


Correlation


The trend is clear: behemoths and beginners alike succeed when the customer comes first. How do you put the customer first? Through your staff. By training them not just to help, but to delight. To make going to your store an experience, something to look forward to. Technology evolves, but humanity never goes out of style. This isn't the end for David Jones, or for Myer. It's just time to reprioritise. Of course there's still a place for department stores, they have exactly what the internet offers: everything in one place. So they need to utilise that, but not only that. Remember who stores exist for: the customer. So put them first, so that they can do the same for you. Shopping, after all, is a two way street.












Courtney Dutton

Courtney is the face behind the Yarno blog. She’s our fact-finding expert, Instagram connoisseur and the only person we know who can write 1500 words and fix a fence in the same half hour.

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