Are Retail Executives Fighting the Last War?

There is a common complaint about admirals and generals—that they are always fighting the last war. Based on the results of a global survey of retail CEOs conducted earlier this year by PricewaterhouseCoopers, the same might be said for these retail generals—they are trying to win the war for the consumer’s wallet with tactics from the past. But those battles are in the history books. The new war is being waged to win over the empowered consumer, and the old tactics won’t work.

What the retail generals told us

PwC surveyed over 400 retail CEOs from North America, Europe, Russia, China, South Africa and Australia to find out more about their priorities and investment strategies to win the retail war. It turns out their priorities are pretty much the same as they would have been 10 or 20 years ago—growing their business through expansion into new regions or markets; opening new stores; and expansion through mergers and acquisitions. They’re fighting the same old wars.

It’s not that these battles aren’t important. It’s just that winning these battles may not translate to winning the war for the empowered consumer. Why? Because it is a different war today. The consumer is different. They are empowered with many more channels, shopping options and paths to purchase, putting them in firm control of the shopping process. Retailers must cater to this new multi-channel phenomenon and provide superior shopping experiences or they will lose the revenue war even if they win the expansion battles.

Why they fight old wars

Most leaders, whether they are generals, admirals or retail CEOs, got to where they are because they were very good at what they did in the past. For example, many of the high-ranking admirals and generals in place at the start of WWII got to that level because they were hard-charging officers in the First World War. The admirals, for instance, believed that battleships were still the pride of the fleet, as they were in 1918, because they could out-gun all other ships on the ocean. Then came Pearl Harbor, and the battles of the Coral Sea and Midway where opposing fleets never saw each other—the battles were won by carrier-based airplanes, not battleships. The old admirals couldn’t grasp the significance of this new reality and were replaced by the likes of forward-thinking admirals Chester Nimitz, Bull Halsey and Raymond Spruance who knew that carriers were the heart of the new fleets.

Are retail CEOs relying too heavily on “last war” tactics with their big-box brick-and-mortar battleships? Are they failing to recognize the significance of the new ecommerce channels flying in on the airwaves? In the survey, only 34 percent of the respondents indicated they thought multi-channel is on the rise and only 22 percent felt it would impact their organizations. Perhaps it’s because they won their wings when the bigger the box, and the more of them you had, the better. But that’s changing.

Fighting current and future retail wars

According to the survey, the number one action retail CEOs say they are taking to gain competitive advantage is maximizing product availability. That makes sense until you realize their main business priorities were to expand their brick-and-mortar battleships, while expanding supply chain capacity came in dead last on their priority list even though only 17 percent of the CEOs thought their supply chains were optimal. Without modern, agile supply chains, their big guns aren’t going to have enough of the right merchandise shells to shoot.

Many retail CEOs are realizing they have to adapt to the new retail realities, however. Big box chains such as Walmart, Tesco, Best Buy and others are downsizing to smaller, more agile store formats with better customer segmentation and assortments. They are also boosting their ecommerce efforts and trying out new weapons such as mobile and same-day deliveries. And surprisingly, given their lack of priority on supply chain investment, 50 percent of the CEOs said that supply chain was a key differentiator; 74 percent said supply chains are a high or top priority. So maybe there is hope yet.

Therefore, my question for you is simple—are you going to be a battleship admiral, doing more of the same because that is what won you past retail wars and ignoring the winds of change until it is too late? Or are you going to be a Bull Halsey, agilely deploying the latest retail weapons to win the current war for the empowered consumer? The choice is yours.

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