Brian Gracon on Transforming for Survival
How many pieces have you read recently about store closings? In the last several months, there have been too many to mention. Sears announced earlier this year that it would be closing underperforming stores only to come back with an announcement later saying they would close an additional 72 stores. After 96 years of selling various electronic gadgetry, Radio Shack announced the closing of 1,000 stores. Payless Shoes says it will close 512 stores, and that’s only the beginning. Teen clothing retailer, Rue21, has filed for Chapter 11 bankruptcy protection and is closing stores.
Then there’s the department stores. Macy’s announced in February that it plans to close about 34 stores in the next few years after it shuttered 66 locations last year. JCPenney is delaying plans to close 138 stores because sales are up since the retailer announced that it was shutting them down.
The list of mall store closings is quite lengthy as well; here’s a partial list with the number of closings: Bebe – 180 stores, Abercrombie & Fitch – 60 stores, Guess – 60 stores, Crocs – 160 stores, The Limited – 250 stores, Wet Seal – 171 stores, American Apparel – 110 stores, BCBG – 120 stores, hhgregg – 220 stores, GameStop – 150+ stores, Staples – 70 stores. The list goes on, but the point is retail stores throughout the nation are closing, and the trend is just beginning.
Certainly, many of these retailers were simply overstored, but the long and the short of it is that the retail environment is changing; consumers are shifting the way they buy, and retailers are rethinking the way they sell. To look into this phenomenon and how it relates to the retail flooring industry, we invited Brian Gracon of Brian Gracon & Associates to share some of his expertise on the subject. You can watch this video in its entirety on the FloorTrends.com website by clicking the video link under multimedia. Here are some excerpts of that conversation.
TF: What is at the core of all these store closings that we mentioned?
Gracon: At its base is ecommerce. Retailers have more competition than they once did and they basically are not able to meet the wants and needs of their customers. The list, as you mention, is long and is getting longer. It’s estimated that there will be about 7,000 retail store closures in the U.S. this year.
In the face of this, and I find this fascinating, not everyone is closing stores; some businesses are actually adding stores. Ulta Beauty is increasing its footprint, adding 100 stores this year. Starbucks is estimated to increase the number of their stores by 12,000 in the next few years, for a 50% increase. T.J. Maxx, Marshalls, HomeGoods, Petco, Costco, Dollar Stores and many retailers are adding stores. The question is, what are they doing that others are not and how does that apply to flooring retailers?
TF: Is ecommerce the prime reason behind these store closings?
Gracon: It sure is. But one really needs to go a little further than brick and mortar versus online. One question is, what is ecommerce providing that brick and mortar stores are not? One such example of that is personalization. When you go on Amazon.com and search for something, you will also see what people who have searched for that particular product are also interested in. They remind you of the products you bought the last time and here’s what you seem to be interested in as well as other suggestions. This is all artificial intelligence behind the scene personalizing your online experience. The question then becomes, what are you doing in brick and mortar stores to provide a personal experience?
Another issue that brick and mortar stores have is the idea of fashion. Many fashion-related teen clothing stores are the players closing stores. Fashion changes and many retailers have not developed strategies to keep up with fashion trends.
TF: What role would you say ecommerce is playing in the floor covering business?
Gracon: There are definitely online players in the floor covering business and that’s all they do. It is a challenge for a brick and mortar flooring store that is a materials-only store. If all a customer wants is the product, customers can get it online. They may go into a store to select the product and go online to get the price and get it shipped. The long and the short of it is that materials-only retailers are under a significant threat. But even if a retailer does a good job providing the whole experience through installation with good customer service, they are still in competition with ecommerce and what it can provide. Brick and mortar retailers need to think of an omni-channel strategy. Certainly, they need to look at their marketing, advertising and social media and be online effectively with these factors, but the customer experience also needs to be a personal one. The question is, what is the retailer doing to provide that high level of customer service and a high level of awareness of their clients? Perhaps they need to focus more on who they are marketing to, their target customer. Maybe they need something more than price reduction. We discussed the efforts Amazon and others are making to meet customer’s wants and emotional needs by offering personalization and a customized experience. Flooring retailers need to ask themselves what they are doing in the personalization arena to compete more effectively with ecommerce players.
TF: During the recession, we saw a great many floor covering retailers close up and go out of business. Is the current situation a threatening one where we may see these closures reoccur?
Gracon: I think we definitely are. If retailers don’t adapt and develop new strategies, focus on customer wants and lifestyle issues, they are under the same pressures and attacks that the malls are. To do this, retailers need to think about personalizing the experience: what are they doing to make it a fun shopping experience? What are they doing to adopt these strategies?
Here’s an example of a retailer that is doing this very well: Dianne Grossman, The Carpet Girl of Springfield, N.J. She has developed some very interesting strategies to help her deal with these issues. Her tagline is, “Your Friend in Floors.” Her entire business philosophy is “I’m going to be the friend to go shopping with you and give you honest advice about what’s right and not right for you.” Her subsequent tag line is, “the most fun you’ll ever have shopping for floor covering.” She is positioning the store as a fun, fashion-forward and entertaining experience. “We’re going to have fun like friends would do.” She does business by appointment only with the message being, “I’m going to offer you personalized service, so it will be necessary to make an appointment.” Women make an appointment to get their hair or nails done, so why not make an appointment to shop for flooring? Her most successful time of the year is the fourth quarter, where her marketing approach is, “Is your home ready for the holiday season so you can have that party you want to have?” She is dealing with the customer’s self-image and doing a lot of things right.
TF: You mentioned operations that were adding stores during the recession, recession-proof types of companies and also retailers that are adding stores even when many stores around them are closing. What types of retailers are we talking about and can this concept work in the floor covering business?
Gracon: Examples of recession-proof companies, for example, are luxury car dealers, entertainment companies, many restaurants and cosmetics companies, nail salons and spas. This is the subject of my book “Meconomics 101: 16 Ways to Improve Your Marketing, Selling and Business Management for Today’s Consumers.” From the success of these recession-proof types of companies I extracted strategies that said if you focus on the customer’s self-image, their desire for entertainment or to be pampered, you would find extremely solid strategies.
I mentioned some of the retailers that are adding stores today when many others are closing stores: Petco, Costco, Aldi, Ulta Beauty, the poster child for this strategy. Think about these strategies, self-image, entertainment and pampering, especially in the case of Ulta Beauty, which is adding 100 stores this year, about a 10% increase in their base. After all, a cosmetic purchase is all about self-image, how do I look? How do I feel about myself? It also provides an entertaining experience because it affords a number of options for women to test and experiment with. You cannot hold a dress up to your laptop to find just the right color lipstick to wear with it.
TF: Obviously, there are some types of businesses that are potentially more recession-proof than others. Is it possible to build more recession-proof elements in businesses that are not inherently recession-proof such as the floor covering business?
Gracon: Let me offer a few examples where the principles also apply to the floor covering sector. First is the AMC Theaters. Over the last few years, they have spent hundreds of millions of dollars to completely change the theater-goer’s experience. They have installed luxury reclining leather seats, they have also added restaurant-quality food—it’s no longer candy bars and popcorn—also, they have added beverage options, including adult beverages. This all adds up to a better experience than most could have at home.
A completely different kind of business is one called Shop the World Gifts, a fair-trade business that sources arts and various items from all over the world. Fair-trade businesses ensure that the artisans that produce the products receive a fair wage and work under safe conditions. Shop the World Gifts brings such items into their store, so if a consumer’s self-image leads them to buy items that will help someone somewhere else around the world, someone who might need a little help, they can find it. Also, if the customer is seeking an entertaining experience, their store is like going to an art museum. And if the customer seeks to pamper themselves or their friends with unique gifts, the store plays to that as well. This concept works for them because the consumers they target want to help someone else. In fact, 60% of their business comes from events they hold for church and civic groups.
So, the question becomes, what can we do in our flooring businesses to do something similar? Are we targeting customers? Do we really have a view of our self-image customer base? I prefer to talk about emographics rather than demographics. What are the emotional wants of the customer, not just that they need something on their floor? Do retailers have this clarity of view? Are retailers providing an entertaining and, if not necessarily a fun and frolic experience, at least something that’s simple, transparent and understandable for the customer as they are guided to a purchase? Also, does the retailer have the quality goods that allow them to pamper themselves? These are some strategies and they may indeed require a different mindset for the flooring dealer to face the challenges that lay ahead.