50 Years to Leave the Retail Scene?

DISCUSSION TOPIC – 10/17/08

TOPIC SUMMARY:

At the SAP Retail Forum in Las Vegas last week, author Michael Treacy stated what he saw as the ultimate paradox in retailing: everything done in early years of a company’s life sows the seed of its eventual destruction. In fact, he said, “most retailers last 30 to 50 years, and then die.” Mr. Treacy offered this solace: it could be worse! The “casual dining” business lifecycle is 20 years.

Mr. Treacy attributed retailers’ demise to what he called “the science of backsliding,” or putting it more bluntly, “companies lose their mojo.”

“Top-down planning followed by diligent execution is killing us,” said the author. “Companies typically bland it down by over-analysis, planning and execution strategies.” The result is that they limit their ability to react to the dynamic, unpredictable business environment. Mr. Treacy stated that one-third of all the business plans that he’s been asked to advise on were “dead wrong.”

Discussion question:  Do you similarly see a 30-to-50 year lifespan in general for retailers? If so, what factors inevitably cause a retailer’s eventual decline? If a primary issue is strategic planning, is the main problem relying on a top-down approach? Or is it fractured planning processes?

My post: 

The unfortunate reality of the last few decades in retailing is a combination of age-old management hubris and the advent of public companies and the requirement to hit short term financial hurdles. The combination is deadly. Management hubris creates missed opportunities and decisions away from the customer. Short term financial focus further separates decision making from the customer. In both cases, the customer loses and eventually votes with their wallet to kill the retailer.

The answer isn’t easy but as long as these factors exist, we’ll always see the cycle of brilliant retail ideas launching, capturing the customers’ interest and creating significant success and growth. Eventually the natural desire for personal wealth growth pushes that retailer into public filings or a private equity grab. From there, the inevitable slide to oblivion begins. Let’s see what the current financial collapse does to this cycle. It should be interesting to watch.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13308

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2 Responses to 50 Years to Leave the Retail Scene?

  1. Mike Osorio says:

    Further thoughts:
    Most retailers fail to last beyond the 2nd generation of management. The first generation of management, whether family or professional management, has the passion and entrepreneurial spirit that defined the retailer’s “right to exist” – their compelling proposition. By the 2nd generation, the money managers have usually taken over and success is defined by expansion via leverage combined with repeated austerity moves to keep expenses low. Eventually this cycle creates a rather plain offer that has little to do with product or service excellence. The customer starts becoming disinterested and is only lured by price. Finally, either enough customers defect to the next cool retail option, or a recession takes away the easy credit that has allowed a mediocre enterprise to survive. Sad. Luckily there are examples of exceptions – but they are few and far between.

  2. […] 50 Years to Leave the Retail Scene? « Dare to be Contagious! ™ […]

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