What's Your Problem?

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What's Your Problem?

By Mike Troy - 09/10/2018

There were times this past summer when it seemed liked things couldn’t get any better for the retail industry. Americans were in the mood to spend thanks to record low unemployment, wage growth, still low interest rates and the wealth effect created by a booming stock market.

The result was impressive second quarter gains by retailers who serve as bellwethers for the economy. Walmart’s U.S. same store sales increased 4.5 percent, the strongest in more than a decade. Target produced a 6.5 percent comp increase that was the strongest it had seen in 13 years. The Home Depot said its U.S. same store sales increased 8.1 percent. Those strong gains were achieved despite the continued growth of Amazon, whose North American sales increased 44 percent to $32.2 billion.

Amazon’s success didn’t come at the expense of malls, those places that are supposedly dying. The nation’s largest mall operator, Simon Property Group, said occupancy at its 206 U.S. properties was nearly 95 percent at the end of the second quarter and lease rates paid by tenants and average sales per square foot were higher than a year earlier.

Things were going so well at the midpoint of the year that the National Retail Federation increased its already bullish outlook for retail sales. The trade group now expects full year retail sales will grow at a minimum of 4.5 percent after initially forecasting growth in the range of 3.8 percent to 4.4 percent.

So what’s the problem? The retail industry is one that perpetually looks ahead to the next quarter, season, year, or in some cases, the next decade. The strong sales seen lately are fantastic, but don’t be lulled into thinking the retail and CPG world doesn’t have plenty of big problems in need of bold ideas. I was reminded of this recently when a colleague working with a major CPG company asked some of the EnsembleIQ editors (Retail Leader’s sister brands include Progressive Grocer, Convenience Store News, Drug Store News, Store Brands, Chain Store Age, Shopper Marketing, RIS News, Apparel and Consumer Goods Technology among others) for our opinions on a list of top problems facing retailers.

It didn’t take long to realize that the list of top problems is long, varies by company and is constantly evolving. There are some common challenges such as labor issues, wage pressures, diversity, food safety, compliance with an inconsistent regulatory landscape, an inability to pass through increased commodity costs, data security, ethical sourcing, shrink, driver shortages in the supply chain and executing omnichannel strategies profitably. And what retailer doesn’t have that nagging feeling they aren’t moving fast enough in a world disrupted by advancing technology.

One of the industry’s biggest problems is actually a collection of seemingly little problems. The phrase “retail is detail” that emerged decades ago has never been more true because retail has become more complex. Increased complexity often means increased cost and that cost can take different forms since complexity introduces the potential for more things to go wrong. There are more opportunities to disappoint shoppers and in a world of extreme transparency more potential for an isolated incident in a store, with a supplier or employee to escalate into a major problem that impacts corporate reputation and sales.

The list of problems shared by all retailers is long, but prioritizing them is a company specific exercise. Every retailer faces challenges unique to their size, financial performance, brand perception, leadership, value proposition, growth strategies and market position.

The robust economy and the resulting consumer demand may have concealed some of the industry’s underlying problems, but they are there in new forms and great numbers, which is why inspiring bold ideas are needed now more than ever. RLa