The geeks are eating our lunch

What is retailing?

 

It would be a bit awkward to call oneself a retailer and you are not able to describe what that means, right?

This is not an academic question. The answer reveals many fundamentals of retail that are worth considering. Bear with me.

Many people wrongly believe that academia is far removed from the practice. That it is somehow ‘theoretical’. This may be true of the hard sciences, but not so much the social sciences.

In this article I want to

  • 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 what 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 these 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.)
  • How is technology shaping this activity?
  • What are customer expectations about bulk breaking and is that changing?
  • Are there new ways?
  • Are there new players?
  • Is it different for different products?
  • 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?
  • Is it affecting me differently to my competitor?
  • Etcetera…

You can consider this to be an academic exercise. Or you may realise that the answers provide good strategic insights about possible actions that are open to you. (This exercise can be repeated for each of the defining attributes listed earlier.)

For instance: Drop-shipping emerged some years ago as a new, viable business model because of the internet.

Some smart retailer (or manufacturer) thought about their supply chain and how they could wipe costs out of 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 challenge for you is to ‘deconstruct’ the other defining attributes. For instance; what does the fact that retailing is defined by its relationship with the ultimate ‘consumer’ really mean for your business? How is that knowledge shaping your strategy – and your operations?

I am willing to lay a bet that 99% of the readers of this post will never have thought specifically about ‘bulk breaking’ and will never have thought to understand the strategic implications of it. (Presumably you would have thought it is academic exercise.)

If you have, here is the final test for you:

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 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.

Retail is a multi-disciplinary activity (art and science as Jon Bird argued last week) and the ‘science of it comprises many disciplines. None of us are masters at all of them.

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. 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 retail industry – 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.

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 1:

In last week’s article 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.)

Post Script 2:

Because of my background/qualifications, people – including some clients initially – judge that I would be academic in my approach. In fact, most people realise quickly they get the best of both worlds with scientific approach to practical issues.

When you are a student of retail (as I am, and hope you are since you are reading this) you should know that the academics simply study what they observe in practice and attempt to explain what they observe. So, in fact theory is playing catch-up with practice. People with an academic background can be very useful to make sense of the chaos that is reality. (And it helps if you have been on the other side as well.)

Thinkers can be doers too.