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04/09/2021

Exclusive Q&A: Steve Dennis says you can win customers amid disruption

Dan Berthiaume
Senior Editor, Technology
Dan Berthiaume profile picture
Steve Dennis
Steve Dennis

A top retail influencer is back with new advice on how to engage customers in uniquely challenging times.

Chain Store Age recently spoke with Steve Dennis, president of SageBerry Consulting, about how retailers can bounce back from the COVID-19 downturn and drive profitable growth for years to come. During a 30-year career as an executive at Neiman-Marcus and Sears, and more recently as a strategic advisor, Dennis has worked with dozens of retail and consumer brands and delivered keynote addresses on six continents. 

On April 13, Dennis will release the expanded and completely revised edition of his bestselling book, “Remarkable Retail: How to Win & Keep Customers in the Age of Digital Disruption.”

How can a brick-and-mortar retailer succeed in the modern omnichannel environment?
The first thing is to not get hung up in channel-centric thinking. The distinction between brick & mortar and e-commerce is increasingly one without much of difference. Shopping is increasingly a blur where digital drives physical and vice versa. The customer is the channel.

The second thing is to think of stores as an asset, not a liability. For years too many retailers stayed stuck in their silo-ed thinking and bought into the mostly false narrative of the retail apocalypse. Unable to grow the top-line they spend too much time chasing e-commerce as a distinct opportunity and under-invested in brick & mortar and it was it takes to serve the blended channel customer. Stores need to be different but with a remarkable value proposition they are far from dead.

Third, stop thinking about omnichannel and start thinking about harmonized. With most customer journeys that result in a physical store sale—and many in-store experiences being enabled by digital technology, it isn’t about being everywhere, it’s about showing up in the moments that matter in remarkable ways. That means dissecting the customer journey to root out friction points and, more importantly, finding ways to “amplify the wow.” 

When products, low prices, consumer access, and information are no longer scarce, what should a retailer do to stand out? 
Even ‘very good’ is no longer good enough to command the customer’s attention in an ever-noisier world and when customers can have just about anything they want from just about anywhere in the world, just about anytime they want it.

To win, grow and keep customers, we must create memorable experiences that are unique, intensely customer relevant, authentic to our brand and, most critically, create deep customer resonance and an emotional connection that demands that the customer share the story of our brand with others—to, quite literally, be remarkable.

There is no one size fits all prescription for every retailer. Unearthing the levers to remarkable requires a deep understanding of our target consumers and what will be remarkable for them that can be made profitable and proprietary to our brand. We must also accept that a slightly better version of mediocre will not enough to command the consumer’s attention, much less earn the sale and to build a trusted relationship.

Mid-level retailers positioned between discount and premier are often struggling. How can they better stand out to consumers?
The unremarkable middle has been shrinking for years—now it is collapsing. With rare exception, most of the store closings and bankruptcies are centered here and the COVID-19 crisis will only accelerate this. With more consolidation very few opportunities exist anymore to sell average stuff to the masses. 

The answer for just about everyone is to aggressively find a road out of the middle, recognizing that it will be pretty difficult, if not impossible to out-Amazon Amazon or out-Walmart Walmart. 

Too many retailers have been stuck in the middle for years, essentially watching the last 20 years happen to them and thinking that they can either cost cut and store close their way to prosperity or make only incremental improvements.

Amazon is disrupting the traditional retailer-consumer relationship. What can retailers do to stay competitive?
Well, the most obvious thing is to be so remarkable that the balance of power is not strongly in Amazon’s favor. The other is to not fall into the trap that you can possibly beat Amazon at its own game. 

Amazon has enormous cost and capability advantages that are impossible for virtually any retailer on the planet to match. Trying to take them head-on is likely starting a race to the bottom. As I quote Seth Godin in my book, ‘the problem with the race to the bottom is you might win, or worse, finish second.’

The key is to achieve parity where you have to, but largely forge your own remarkable path.

If you had to sum up “remarkable retail” in a paragraph or two, how would you define it?
Part 1 is entitled ‘Shift Happens,’ and it lays out the seismic shifts in consumer behavior and digital disruption of the past two decades, what they mean and what we should most intently focus upon. I make the case why even very good is not good enough anymore and why we must choose to be remarkable.

I call Part 2 ‘The Journey to Remarkable,’ and I detail my “Eight Essentials of Remarkable Retail” framework for transformation. I devote a chapter to each explaining what they are, why they are important and how retailers can put them into practice. I wrap up Part 2 with a call to action and recommendations on how to best commit to navigate our brave new world.

How has COVID-19 changed the retail landscape?

Aside from raising the importance of safety in many consumers’ minds, I see six fundamental ways COVID-19 has changed retail.

First, we are seeing an ever-widening gap between retail’s haves and have-nots, a phenomenon I’ve referred to for years as ‘retail’s great bifurcation.’ Success is increasingly being found at both ends of a spectrum, with value and convenience at one end, and brands offering unique products and an elevated experience at the other. The pandemic has created even more pressure on the undifferentiated middle (moderately-priced department stores being the best example) and many are closings stores or going away completely.

Second, most major trends are accelerating, with the spike in online ordering and the growing blurring of the lines between digital and physical store shopping being the most obvious. Many comparatively nascent technologies—contactless payment, livestreaming commerce, virtual personal shopping, curbside pickup and more—saw far greater adoption.

Third, we saw a major reallocation of spending driven by folks spending far more time at home. The absence of dining out gave way to take out and preparing meals at home. Everything from fitness and office equipment, to home improvement and pet supplies, to streaming entertainment services saw amplified sales. Travel, gasoline, apparel and accessories were hit very hard. This distortion is starting to moderate, but the fortunes of many retailers were affected greatly for more than a year.

Fourth, many years of overbuilding of retail real estate, combined with the economic impact of COVID-19 on certain sectors, is forcing many retailers and shopping centers to scale back considerably or close forever. Given the large amount of government stimulus, the full effect of this is yet to be seen.

However, we are already seeing power consolidate to the strongest brands and malls, and well capitalized companies take advantage of a strong balance sheet to buy up brand and assets at very attractive prices.

Fifth is, as Rishad Tobaccawala calls it, ‘The Great Rewiring.’ The way we think about where we live, how we work or are educated, how we shop, how we dine, how we are entertained and how we travel are likely forever altered. For retailers, many ways of doing business must be fundamentally re-imagined and their long-term real estate may shift dramatically as urban cores may be far less desirable and a large number of malls disappear or are massively repurposed.

Sixth, is a phenomenon I call the ‘hybridization’ of retail. We were already on a path to where the lines were blurring between digital and physical pre-pandemic. Today’s remarkable retailer must see the customer as the channel and must evolve its outlet deployment strategy and the size, layout and operations of their brick-and-mortar locations to reflect a world where a store serves increasingly diverse roles: part place to go and buy things, part service center, part marketing billboard and part e-commerce fulfillment center.

Your book discusses a “lack of scarcity” in today’s always connected world. How can retailers create scarcities that will attract consumers?

Digital disruption and the growing role of online shopping has created an abundance of product availability, access, information and low-priced options, 24/7. Even if you operate extremely well –if you are selling something that can be purchased from many different places online, perhaps at a lower price or with more convenient delivery— it’s become virtually impossible to sustain a profitable operation at any scale. Very good is simply no longer good enough.

Today’s sources of scarcity must come from providing a truly remarkable experience --by being intensely customer relevant and delivering highly differentiated products and/or services. Ideally, what a retailer does is so distinctive and impactful that customers will spread the story of the brand, to literally, remark upon it.

What do retailers get wrong about e-commerce?

The main thing is to think about e-commerce as a distinct business or channel and essentially compete with physical stores. Digital drives physical and vice versa for the vast majority of retailers. Amazon was the main exception to this for years, but now it is investing heavily in brick & mortar because it understands this dynamic.

Online shopping is a tool, and an increasingly important one, but the profit dynamics are often challenging. Also, it turns out a lot of what we call e-commerce actually involves a store in a meaningful way. The online shopper might have initially been acquired in a physical location or received sales help there. The order might be fulfilled from a store for pickup or delivery. The line between e-commerce and physical shopping is becoming a distinction without much of a difference for most remarkable retailers.

What do retailers get wrong about brick-and-mortar commerce?

As alluded to above, it’s not especially helpful to think about e-commerce vs. brick-and-mortar commerce. The customer is THE channel and it’s ALL commerce. We must break down the silos in customer data, inventory, metrics, etc. if we are to deliver a remarkable, well-harmonized experience, however and whenever the customers shops.

The other thing many retailers get wrong is to think that closing stores is likely to improve their business. It may work on the expense side, but large-scale store closings make the brand less relevant and convenient for customers and tends to harm the e-commerce business. I’m not aware of any retailer that has ever store closed their way to prosperity.

Lastly, retailers need to stop thinking about their stores as places for customers to see products and take them home. That is often a big part, but they need to embrace the blur that is modern retail and reimagine their stores and the hybrid role they play in the customer journey. This will require both significant investment and a radical rethink of many retailer’s operating models and supply chains.

If you had to select one piece of advice that has changed since the first edition of “Remarkable Retail,” what would it be and why?

It’s more important than ever for retailers to build agility into their business model and culture. The big difference is that much of what I worried about happening over a period of years happened in a matter of weeks or months; so the timeline for struggling retailers to mount a transformation has collapsed in most instances.

What I would double down on is to remind retailers that it’s more likely than not that the amount of change they must execute is much greater than they can imagine. I also find myself repeating one of the quotations in the book that is from Carlos Castaneda’s Journey to Ixtlan: ‘The problem is, you think you have time.’