Is Traditional Retail Dead?

In Manhattan, there are always a bunch of stores -- aimed at tourists -- that hang huge banners proclaiming "Going Out of Business Sale -- huge discounts."

Some of those stores have been in business, it seems, for decades.

The overall retail sector may have a lot in common with those stores.

According to "The Death of Retail is Greatly Exaggerated,"

As of early May, S&P Global Market Intelligence tallied a record 18 retail bankruptcies, al­ready matching the total for all of 2016. The carnage is on full display in the new Fortune 500 list: Household names like Macy’s, Sears, and Kohl’s all took tumbles down the list, as did other struggling chains like GameStop (GME, -0.37%) (falling 19 spots, to 321) and Dillard’s (DDS, -0.94%) (which fell 37, to 417).

We began seeing/predicting the fact that retail would go through a rough 2017 back in Q1, and feel that it is a big issue because:

• The U.S. retail sector is a huge employer, including part-time and seasonal work: 15,836,200 as of May 2017 -- down from Feb. 2017 of 15,887,600, which represents a loss of 51,400 jobs, a significant drop in a short time. (By the way, back in 2012, the sector employed 29 million people, according to the National Retail Federation.) According to the NRF, which does a tremendous job of tracking the state of the retail industry, the retail sector "is the largest private employer in the United States. Retail directly and indirectly supports 42 million jobs." Basically 1/4 of all private jobs. We'll get to directly and indirectly in our third bullet. 

• The U.S. retail sector holds leases and owns a tremendous amount of real estate. According to one estimate, there are more than 1,000 malls in America and that doesn't include downtown real estate holdings. In fact, Macy's real estate holdings by themselves may be worth more than the actual retail side of the business, according to Fortune's senior retail reporter, Phil Wahba, who also wrote the "Greatly Exaggerated" story. That said, those value and viability of those real estate holdings may be in jeopardy if suddenly they all came onto the market. We've already seen the impact of retail-store closings on Greenwich Village's Bleecker St. in a New York Times article.

• The U.S. retail sector contributes $2.6 trillion annually to U.S. GDP, according to the NRF, approximately 15% of the total economy. That includes retailing companies along with other companies that support the retail industry, such as logistics, including trucking and shipping; warehousing; construction and maintenance; agriculture; manufacturing; technology; and health care. Basically, if the retail sector takes a hit, the rest of the economy will suffer.

Does this mean the retail sector is dying? Not really. The parts of the retail sector is somewhat cyclical and other parts are very sensitive to external factors -- like the weather or other trends. So a downward trend, by itself, is not necessarily troubling. And some retailers continue to do well, including Walmart, Home Depot, Costco, TJ Maxx and Best Buy, according to Fortune. 

What is troubling is that there's a fundamental shift going on, towards online and mobile. Bricks-and-mortar stores may no longer be about buying but sampling and community, according to another Fortune article. http://for.tn/2r8qLET. Instead, retail may seek to leverage: "newly available real estate to experiment with boutiques, showrooms, and pop-up shops." If that trend continues, it will mean a further decline in the number of full-time retail jobs and a further decline for companies that support retailers.

While reshaping retail to better meet the needs of consumer is good news, and more efficient, that's not good news for the long-term health of the sector. A lot of retailers that sell fashion commodities such as basic Ts and jeans will likely not survive in an e-commerce playing field. 

And one more thing, which has been overlooked by retail reporters: According to the NRF, 98.6% of businesses employ fewer than 50 people.  In a world in which most retail transactions take place online or via an app, these local mom-and-pop stores don't stand a chance. They may not have the skills and resources to move their business online, and may not be able to compete on price. They won't be able to survive the Amazonification of retail. This could decimate small retailers and small towns around the country.

That's going to be a big story the rest of 2017 and going forward.

 

Is Your Organization Social Media Responsive?

What seems like a long time ago, the news cycle was about 24 hours -- from the time "news" happened to when it would appear in newspapers and then on TV and radio. (At that time, cable news didn't really exist.)

Now, the news cycle is probably an hour -- tops -- before it hits social media.

It used to be that if you were in a crisis, you had hours to assess and determine how to respond.

Hours is a luxury.

Six years ago, during the Arab Spring, Kenneth Cole, a clothing designer also known for provocative ad campaigns, posted a provocative tweet in the morning and didn't check back until late in the afternoon when he realized Twitter was in an uproar because he didn't update or apologize in the initial blow back.

The fact that he was in meetings and busy was seen as no excuse.

Companies no longer have hours -- they didn't even have that back in 2011 -- to contemplate a response.

We see the implications of this everyday, whether it is a tweet rant from Trump or a poorly executed tweet from a brand or media property.

Unfortunately, most companies aren't social media responsive, by which we mean: able to respond quickly to a problem involving them on social media.

Here are some steps to consider:

• Don't rely on apps that post content to also alert you to a potential problem. Posting content is very different from monitoring and generating alerts. Consider subscribing to an alert service so that you don't find out about a problem only the next time you log on to the app. Too many services -- even Twitter -- do a better job of capturing mentions without doing a good job alerting you. (We're not going to mention specific potential suppliers since some of these companies and a lot of their functionality can change very quickly.)
• Make sure appropriate trusted people within your organization have the username and passwords for all major social media platforms, and are comfortable posting onto them. Too often, the login information for a company's social media accounts are held by different people so that if a problem happens, and the person managing Twitter is in an all-day off-site, there's no one else who can access the site to try to put out a fire. Sometimes, we've seen, the person in charge of, say, Facebook, has left the company without designating someone as the administrator, only as someone who can post. It's important that trusted people can back up the main driver if that driver is out of the office. Also, for this reason, it's important to know when key people -- whether it's the social media guru or the executive to be quoted -- are on vacation or otherwise unreachable for long periods.
• Do scenario planning to practice how to respond. One hopes to never have to use a crisis plan but it really is helpful to develop one, even if just for social media. In this case, you would look at likely areas for concern -- could it be a customer complaint? A rogue tweet (meant, perhaps, for someone's personal account)? A hacked account? A legal issue? What should you do to address this issues? Without a scenario planning, you may not have an idea of what to do when seconds count.

By the way, the same should be done with a look to how to respond to the media. 

For example, there used to be something known as a "day-two" story -- a story that provided a different aspect of the story getting media's attention. On the first day, the news breaks. On day two, one might pitch a story that provides more context to yesterday''s breaking news.

As with everything else, the time to develop and pitch day-two stories has shortened considerably. Now known as "news jacking," the idea of responding to breaking news and inserting your company in an appropriate and positive way, you need to respond with a contextual pitch within hours, not days. The context to the story that former Uber CEO Travis Kalanick started hitting as soon as the initial stories began hitting. 

While it's true that stories still appeared about a week after he was pushed out, the names of the executives who were being quoted were big name celebrity executives like SalesForce CEO Marc Benioff and former Yahoo! CEO Marissa Mayer. 

If you want to be able to position yourself as an expert to the media on a breaking news topic, you need to respond much faster than you used to in order to get coverage.

Of course, you still have time to write a blog article for your corporate blog (like this one) after the fact but that's not the same as being quoted in a reputation-making outlet, blog or podcast. Your team and the executive(s) in charge have to have a sense of urgency.

Without that urgency, you may be able to respond but you won't truly be responsive.

As a caveat: Not every organization can or should move that quickly. But we're speaking to those organization whose marketing director is looking for quick hits by news jacking without providing the resources or the ability to move as quickly as you have to secure coverage.

Internal Communications When an Acquisition Deal Does Not Get Completed

A few years ago, I wrote an article, "Three Stages of Merger Communication" for IABC's online newsletter. Recently, I was asked if I had any advice when a merger does not go through. Here are some thoughts, that were originally published in CommPro.Biz.

It seems to go unnoticed but a portion of announced merger or acquisition deals do not go through. Reasons range from regulatory issues, such as antitrust issues; management retention issues (the length of time they are to remain in current or similar positions, non-competes for senior management, etc.) as well a pricing issues, working capital requirements, deal-related and non-deal-related lawsuits, and other due diligence issues.

After a company has announced it has come to an agreement to purchase another company, typically the CEO and management team of the acquirer will convene a town hall meeting at the target company’s headquarters to address employees to explain the rationale for the deal – why the two companies will be stronger together than on their own – and what changes new employees can expect.

If the deal falls through, the target CEO and management team need to again meet with employees and discuss why the deal fell through (with input from legal counsel). Management shouldn’t delay getting in front of employees because they’ll already have a sense of whether or not the acquisition or merger is working out. Again, with input from legal counsel and the company’s communications staff and advisers, management needs to address the following:

• How to address any rumors that might be circulating prior to the official announcement that the deal fell through. There certainly will be rumors flying around.
• How to address the company’s future. Management needs to discuss its new road map – will it continue as a standalone or will it search for a new, better partner.

o   If the future is to remain a standalone, management needs to explain why that makes sense in light of the fact that it had recently been ready to be acquired or to merge with another company.

o   If the future is to find another partner, management needs to discuss what lessons it learned, what it will now look for in a new partner.

Mostly, employees want to know – and management needs to reassure them – that the company’s future is assured, that employees should be focused on the future, proud of what they will continue to build.

Though this is not an internal communications issue, management needs to also reassure customers, partners, vendors, investors and other stakeholders – as well as current and prospective employees – that the company is stable and has a future. This may be a challenge if the target company had stated during the initial acquisition announcement that a primary reason for the deal was to access the necessary capital to expand. So management will need to find a way to credibly walk back that reason.

Mostly, the once-target company needs to be prepared that others may start circling the company, looking to offer a lower price because the target is considered damaged (since the deal did not go through – even if the problems was with the acquiring company). It is crucial to be able to discuss a stable, strong future.

Some things to keep in mind:

• Don’t wait too long to announce that the deal will not move forward. While no company, especially publicly held companies, want to address rumors, management needs to get ahead of the news rather than for it to come from outside. If you wait too long, you’ve lost control of the narrative.
• Be clear on what you’re communicating. Your answer needs to be consistent and accurate. It undermines employees’ faith in management if conflicting messages are offered up by management.
• The almost-acquiring company and the nearly acquired company will continue to have different goals at this point, especially since people may want to point blame to one party or another (which can include management teams, attorneys, bankers, etc.) While communications teams of both companies worked together to prepare for the initial announcement to coordinate priorities, next steps and goals – that almost won’t be the case here. So one company may want to go back to reporters who originally covered the announcement while the other company may want to let the news fade. Ultimately, you need to be professional and act in the best interests of your company.
• There could be lawsuits as a result of the failed deal, certainly from shareholders and possibly from one company suing the other. If there is a lawsuit, the company needs to reassure employees so they don’t get distracted by the lawsuit (and any coverage of that suit) so they can stay focused on the company.
• Internal communications needs to help reassure employees – rather than give them reasons to bolt to another company, which could include  the former acquirer. As you develop your communications plan, keep asking: Does this address employees’ concerns and fears? Does it speak to them in a way that seems authentic (as opposed to legalese, which does not reassure parties of either the first or second part).
• Don’t ignore employees (or customers, partners, vendors, investors and other stakeholders) and hope everything will be okay. Now, more than ever, they need to feel that management has things under control and can deliver on a steady, stable future.