An Innovative Offense Is the Best Defense

Larry Selden, professor emeritus, finance and economics of Columbia University and the Wharton School of Business, calls this current phase “an extraordinary time for retailers.” Why?

Besides facing the worst retail sales since 1969 (Selden’s words), chains are dealing with declining retail share prices, and more companies are partnering with a new group of retail investors—private-equity firms. Tension is further exacerbated by a volatile economy, the threat of a recession, and a slumping housing market.

While these elements are clearly causing anxiety across the retail industry, “Something can be done to increase stock prices,” Selden told attendees at the recent RetailConnections Business and IT Executive Summit in Boca Raton, Fla.

“As retailers struggle in a weak economy, the first thought is to cut costs,” he said. “But this is not the time to be playing defense.”

At first, his statement struck a nerve. Then it hit me: There has never been a better time to step up innovative solutions investments.

Still not convinced? Consider the point of view of Bennett Nussbaum, Winn-Dixie Stores’ senior VP/CFO. “This is not a time to question, ‘What can I cut?’” he said during the conference. “The real issue is what shouldn’t be cut?”

For me, the answer is obvious: Retailers should re-evaluate their commitment to adding innovative solutions.

Clearly, this is no time to blindly jump into bleeding-edge applications. On the other hand, the timing is perfect for companies to explore and deploy innovative solutions.

By definition, these technologies add or enhance key value to the company by creating efficiency, improving performance or reducing operating costs. Most importantly, these solutions could be a key differentiator for chains once the economy picks up.

This mind-set could change the face of retailers’ current game plans and budgets—especially long-term ones. And no two companies’ strategies will be the same.

Since each chain’s needs are different, it will be interesting to see where chains will focus their efforts and IT budgets. While that remains to be seen, here are my top predictions:

Sure it seems risky to make these significant investments in such a volatile marketplace. But the strategy is a long-term one.

Get the investment and growing pains out of the way now. When your competitors are playing catch-up later, you’ll remember why you took the chance.