Misery loves company, or so the saying goes.
And while one could perhaps quibble with the exact phrasing there — misery probably, more accurately, likes company but would, on the whole, only love not being miserable anymore — the recent run of numbers in retail certainly brings the old adage to mind.
While not quite every retailer took a beating — Amazon had a great quarter, Walmart logged solid results, TJX continued its winning streak and Urban Outfitters and H&M managed to find ways to keep the customers coming — the overall story was something of a downer.
And a repetitive downer at that. Whether one was talking about Macy’s, Gap Inc. or even Costco, the story was just about the same. Foot traffic is down, same-store sales are down, revenue is falling and share price has been evaporating. ECommerce is up but not enough to offset the plummet in physical store sales. And while off-price goods (particularly for brands with chains that specialize in them, like Macy’s Backstage or Saks OFF 5TH) are a consistently growing item on everyone’s balance sheet, people buying at full price are becoming an increasingly endangered species.
That is what happened. The question now is: What happens next?
“I think the undeniable lesson for Neiman Marcus and most of the nation’s mainstream retail players is that we’re past the point where we can talk about making changes to how we operate our businesses. Now is the change-or-die point in retail. Just tweaking what we’ve always done — the clock has run out on that,” on Neiman Marcus exec told us in a recent interview.
Neiman was one of the many department store chains that felt the great deflation during the recent run of earnings. Total revenues decreased 2.3 percent during Q2; year-over-year revenue dropped to $1.49 billion, down from $1.52 billion. Net earnings were $7.9 million, a 71.6 percent drop when compared to the second quarter of fiscal year 2015’s earnings of $27.8 million.
“Obviously, we weren’t satisfied with those results, but it also helped to clarify our efforts,” one senior executive told us noted. “We’ve seen our eCommerce efforts grow remarkably over the last two or three years. We’ve seen for a long time that the digital consumer is the future of retail.”
But that realization, is only part of the battle, and the challenge retailers face is building an experience that gives the customer the best of both a physical and digital experience, as opposed to what he called a “knee-jerk reaction.”
“I think there is a tendency when foot traffic starts falling to say, ‘Oops, everyone is only shopping online these days, so we better just roll up the rugs and start life as an eTailer.’ I think there are a few problems with thinking that way, the first of which is just assuming everything gets easier when you just move a shop online.”
But switching to online operations are difficult and particularly logistically challenging, and moreover, simply deciding to switch purview overlooks the simple fact that Neiman Marcus is a physical retailer and is good at physical retail.
“What we are doing now is really trying to build a single shopping experience that follows our customers from one point to another. Did you start online? Or on your phone, on the train, on your way home? Great. We want to make it easy to go from that experience directly into a store and pick up where you left off.”
Five years ago, the conversation used to be about building the “in-store” experience and “online experiences” as two different projects. He said that they aren’t doing that anymore, because all of it is just the “Neiman Marcus experience” and it is remarkably recognizable no matter what the consumer’s entrance point is.
“We want [the consumer experience] to work like that from all points on the journey. Did you see it in the store and want to think about it then decide later? Oh, geez, I really wanted those shoes. Fine. From the moment that thought hits you, we want you to be able to pick up your phone, act on it and be done with it in less than two minutes.”
Which is not to say that Neiman doesn’t want shopping in a store to be something special, it does. The internal consensus on the subject is that easy operability in a variety of modes shouldn’t count as something special that retailers are doing. At this point, that is just “table stakes.”
“We think the in-store experience … just by nature of being a full, immersive use of time, always has the most possibilities to connect with our customers, because it is the best opportunity for showing them something they didn’t know they wanted. I think the opportunity for discovery is the ‘special’ element in every physical store, and we offer some of the most eye-catching discoverable out there.”
Because discovery is an important part of the fun of shopping.
“There is no picture good enough that it is better than actually going and seeing the Eiffel Tower.”
But seeing the Eiffel Tower is not all there is to a trip to France, he noted.
“There is an easy way to make that trip happen, where all the research and booking happens online in an interconnected, streamlined way and so all the consumer has to do is click a couple of buttons, show up, buy a baguette and marvel at its beauty, and a not-so-easy way, where the process involves managing lots of different streams and the vacation becomes a full-time job. That traveler gets fed up and never makes it to the Eiffel Tower.”
At the end of the day, customers don’t want to have to work hard to purchase things, and that means it is incumbent on Neiman and “probably anyone else who wants to stay in business” to take as much work out of the process as possible so that the customer can just focus on the fun part of the process — buying the thing they want. This, he noted, is among the reasons the store has recently begun installing wireless charging stations in store locations. Customers not worrying about whether or not their battery is going dead are much more able to enjoy the entire shopping experience.
‘I think it is pretty much a no-brainer that, if you can make it easier for customers to stay in-store by charging their phones, one should do so.”
No-brainers are rare in retail these days. But despite the difficulty and the recent setbacks, Neiman Marcus remains confident that when the dust clears, it will be among those left to tell the story of what a successful retail reset looks like.
We’ll keep you posted on how it turns out.