By Dr. Marie Gould Harper
Program Director, Management
Earlier this week, while I watched the morning news, two events caught my attention. These events were the closing of the Ralph Lauren flagship store on Fifth Avenue in Manhattan and the Gillette Company’s price reduction on its razors by 12 to 20%, depending on the product.
The situation with Ralph Lauren was not a surprise. Two months ago, Ralph Lauren’s current CEO, Stefan Larsson, announced his resignation over creative differences with founder and former CEO Ralph Lauren. Although Larsson was hired to revive the company, conflict arose between the two men on how the company should evolve. In the end, Lauren won.
Gillette reduced the price of its products because its competition offered alternative razors at a lower price. For years, Gillette’s business tactic was to add new features to its current product line and raise prices. Gillette’s mentality was, “After 113 years of success, why shift gears?”
However, Gillette’s strategy no longer works. Gillette, a unit of Procter & Gamble, decided to change its focus. According to Fox Business, Gillette wants to compete with online start-ups, such as Dollar Shave Club and Harry’s, that sell their products at lower prices.
In addition, chain retailers such as Rue21 and Payless have filed for bankruptcy. Many brick-and-mortar stores are closing, and shopping malls are beginning to have a lot of rental space available. As a result of the decline of conventional shopping, retailers will need to lay off employees.
Some Retailers Are Not Adjusting to a Shifting Market
What we are witnessing is a shift in the market and some organizations have not adjusted to meet the challenge. As a result, they have been forced to make changes in how they operate.
For example, Ralph Lauren Polo has been a legacy in luxury goods for decades. However, the audience for that market has declined over the years.
The company needed to reinvent itself, which is why Larsson was hired. He has a track record of increasing revenue and turning retail clothing companies around, especially popular ones such as H&M and Old Navy.
Although Larsson had a successful track record repositioning organizations, he missed out on something this time. He miscalculated Ralph Lauren’s desire to remain actively involved in the creative side of the business. As a result, the two men had a difference of opinion regarding the “next steps” for the company.
Gillette, Rue21 and Payless are also experiencing the same problem – underestimating the popularity and significance of online shopping.
How Does the Leadership Team’s Decisions Affect Workers?
According to Credit Suisse Group AG analyst Christian Buss, year-to-date store closings are already outpacing those of 2008’s Great Recession. Buss notes that 2,880 store closings have been announced so far this year, compared to 1,153 for this period of 2016.
He estimates there could be 8,640 store closings in 2017, which would be more than the 2008 peak of about 6,200 closures. When stores close, people lose jobs unless the companies shift the workers elsewhere.
My vote would be to retool the store employees and allow them to transition to their company’s e-commerce line of business. For example, Macy’s introduced the omni-channel model and, according to surveys, customers love it.
Omni-channel is about “inventory optimization through technology,” said Terry Lundgren, chairman, president and CEO of Macy’s, Inc. at the recent Global Retailing Conference. Inventory visibility across all stores and channels is the key enabler, he noted. “By the end of this year, 500 stores will be ready to pick online orders, and 90 percent of our inventory will be visible to our associates on hand-held devices.”
Store employees can be pulled off the floor to work with the fulfillment centers to get products to customers promptly. Research has shown that customers buy three to four times more from the omni-channel experience versus a single shopping channel.
Technology Is Crucial in Transitioning to the Next Phase of the Changing Retail Market
The retail industry is not unique in experiencing problems brought on by changing habits and economics, as shown by the problems in the financial and housing industries. About two years ago, I spent a couple of days with retail industry executives and peers from other academic institutions across the United States.
The purpose of the meeting was to highlight the positive aspects and opportunities of working in the retail industry. Based on the conversations at that meeting, I would say retail leaders know that technology is crucial in transitioning to the next phase of the changing retail market. However, there is a difference in knowing what to do and getting it done.
If there is no change in the trends, I’m concerned that more stores will file for bankruptcy and close, and more people will lose their jobs. All of the work that is being done to attract college graduates to the retail industry won’t yield the desired results if retail executives cannot successfully forecast how their organizations will grow, rather than simply shutting down their businesses.
Many stores now attract customers with incentives to order online such as free shipping or future discounts for picking up orders in nearby outlets. However, Walmart recently upped the ante with its plan to pay customers for picking up online orders in-store.
Another option is to sit back and watch the looming retail war between Amazon and Walmart for online shoppers. Both companies might develop some best practices to take the industry into the next phase.
Amazon, it’s your move, unless someone else is willing to get into the game.
About the Author
Dr. Marie Gould Harper is the Program Director of Management. She holds an undergraduate degree in psychology from Wellesley College, a master’s degree in instructional systems from Pennsylvania State University and a doctorate in business from Capella University. She is a progressive coach, facilitator, writer, strategist and human resources/organizational development professional with more than 30 years of leadership, project management and administrative experience. Dr. Gould Harper has worked in both corporate and academic environments.
Dr. Gould Harper is an innovative thinker and strong leader, manifesting people skills, a methodical approach to problems, organizational vision and an ability to inspire followers. She is committed to continuous improvement in organizational effectiveness and human capital development, customer service and the development of future leaders.
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