Welcome to the Omni Talk Fast Five, where Chris Walton and the team break down all the exciting news stories from the week. Click here to subscribe.
Omni Talk Fast Five
Some really interesting headlines popped this week, and after last week’s more “mathy” send up of Macy’s, I am excited to get back to the origins of the Fast Five and to close out the week with what I hope is some bar raising insight and humor
Let’s get right to it . . . rapid fire style.
Mockingly, one of my predictions for 2018 was that incoming Kohl’s CEO Michelle Gass would this year awake from a nightmare of being caught in the crossfire of a snowball fight from a scene out of the movie Grumpy Old Men, and then desperately want to sell Kohl’s to the highest bidder. This week’s announcement only gives me further reason to double down on my joke.
Kohl’s “testing” Aldi in, wait for it, an awe-inspiring 10-ish of its stores is like Wilford Brimley asking Don Ameche to go for a swim in the movie Cocoon, while Steve Guttenberg looks on with his trademark shit-eating grin. Check the demographics folks — how does this make sense? It surprised me too, but a disproportionate amount of both Kohl’s and Aldi’s sales come from the baby boomer generation, i.e. the over 50 demographic.
Talk about splitting tens against the dealer.
Kohl’s are you really betting on a demographic that is getting less important by the minute? Oh, and dying too.
I almost forgot that part.
The only people that like this move probably also still use the word “credenza.”
Admittedly this headline is a bit of a hangover from last week, but it deserves mention because it was still in the news, and I also received a ton of questions on it from readers and listeners.
Best Buy is the Rocky Balboa of the retail industry — no matter how many punches it takes, Best Buy continues to pick itself up off the mat and yell, “Adrian!” for all Wall Street to hear.
Five years ago, I remember having conversations that Best Buy was dead in the water, that their products were non-differentiated, and that they stood no shot amid the growing world of e-commerce.
Flash forward today, and they are announcing +9% same store sales comps, DESPITE a 20% e-commerce penetration rate — i.e. the typical point of no return for most retailers.
I don’t know how they do it, but I am starting to get some ideas.
First, they understand why people still come to physical spaces. They have oriented their stores around the things that are difficult to simulate online, specifically taction (touching, feeling, and trying products out) and instilling confidence via their service orientation.
Second, bringing in Hubert Joly was clearly a smart move. Here’s a dude who came to Best Buy after having tremendous success in the hotel, restaurant, and travel industries.
Or, said another way, DUDE WASN’T A MERCHANT! He was a product manager who understood why people still go to places. Sound familiar? Hope we see more of it — soon!
Third, like Jules in Pulp Fiction, Joly’s wallet is probably stamped with the words “bad ass motherfucker” because he and the entire company are not afraid to take risks. Refusing to sell physical CDs and shuttering your entire Best Buy Mobile operation takes some serious peapods. On the CD topic alone, some companies are too scared to take them out of one store, even as an experiment, let alone an entire chain.
Not Joly though. He sees the future, and, like Booger from Revenge of the Nerds, in Risky Business, Joly is not afraid to say, “Sometimes you just got to say, ‘What the Fuck?’ Make your move.”
(#3) Study: Voice shopping to surge 1,900% by 2022 — Retail Dive
My buddy, and Omni Talk fan, Andy F. would tell me that this projection is actually far understated (truth be told — Andy is a HUGE voice groupie). Regardless of the study’s predictive accuracy though, voice is coming, and it will be transformative. And, as Andy also likes to point out, voice really has nothing fundamentally to do with Alexa or Google Home either.
He is 100% right. The hardware isn’t what matters. The software inside is what matters. In fact, the physical substrate is entirely irrelevant. What matters is where and how voice can function as a software platform inside or as a part of almost anything.
Think about it this way. 20 to 25 years ago, we had no idea what a browser was. Same can be said for e-commerce apps in just the last 10 years. So, is it really that outrageous to think that voice-based applications couldn’t become something different than we know today?
It is not. Voice has the potential to disintermediate everything we know. The use of a browser on a desktop computer could become a thing of the past, as could run-of-the-mill e-commerce apps, meaning the sales volume that retailers like Walmart, Macy’s, and others do on their standard e-commerce portals today could be 100% reshaped in the next few years, bringing with it, the incredibly technical term — a shit ton of risk.
What is even scarier is that retailers are partnering with the likes of Amazon, Google, and Apple to be a part of the first-generation solutions rather than building out their own internal capabilities.
Why didn’t retailers learn their lessons from the 1990s? Retailers already fell for Amazon’s mousetrap once. Will they seriously fall for it again, and now Google’s and Apple’s too?
Say it ain’t so, Joe, but it looks bloody likely.
(#4) Report: Ikea adding city showroom-formats; adding online services — Chain Store Age
This one is exciting! In my the Store of the Future Promises to be One Hell of a Party presentation that I have been giving across the country, I have been urging Ikea to take this bold step. Well done Ikea! The showroom model in today’s digital age gives Ikea access to entirely new swaths of customers.
This move then also begs the question — Wayfair, what the hell are you doing? Are you asleep at the wheel? Your stock is still priced fairly high, so the capital is likely available for you to expand your operations into a physical footprint. What are you waiting for? You don’t need a management consultant to tell you that the window is closing.
Or, do you?
(#5) Spring Home Sales Could be the Weakest in Years — Wall Street Journal
I have already hinted that Q1 could be a wakeup call for the industry. This headline does not help the situation.
The economy and many retailers have built momentum on the back of recent housing activity. Home furnishings have been a boon to legacy bricks-and-mortar retailers both in store and online.
But here’s the kicker – these sales are relatively high margin, especially in e-commerce, when compared to other categories. If sales of home furnishings products start to slow at a macro level, then the digital growth on which companies have recently prided themselves is only going to get more difficult and more expensive. This news does not bode well for companies where home furnishings are a significant portion of their business.
(Bonus) Tower Records Founder Russ Solomon Has Died At Age 92 — NPR
If you are a frequent reader of Omni Talk, then you are not surprised that the passing of Tower Records founder Russ Solomon made my list. It is important to pay our respects to the pioneers in our industry.
Also, Tower Records is a fabulous case study to help us all shift our context and to develop a willingness to alter our point of view against the prevailing sentiments of the day. If you have never watched it, I highly recommend the documentary All Things Must Pass: The Rise and Fall of Tower Records. It is a fascinating watch, especially with everything that is going on right now.
It highlights one seminal lesson — a business is only as good as its business model. Team, effort, intelligence are nothing compared to the strength of the underlying model. No matter how much we push, how loved a business was or is, or how smart people are, if the business model fails to adapt, the efforts are futile. It’s like pushing water uphill.
Let Russ’s passing be a reminder and a call to action for us all that we need new approaches to our industry.
Innovation is not Seattle’s birthright.
Be careful out there,
P.S. I am taking next week off to spend time with the family. The Fast Five will return the following week with insights and takes from Shoptalk, my favorite conference of the year (subscribe here). Fear not podcast fans — Anne and Carter have volunteered to keep our podcast efforts going next week. Thanks to them and to all of you for your continued support.
P.P.S. One of our devoted readers and evangelists, David Neff, is presenting a Problem Solution Mapping workshop at SXSW next week. You should check it out if you plan to attend the conference. Here is more info.
P.P.P.S. I have a fun weekend planned with Mrs. Omni Talk. In honor of Kohl’s and Aldi, we are going to fire up our Rascals, Costanza-style!