The Times They Are A-Changing

"Dear Editor: I am 8 years old. Some of my little friends say there is no Santa Claus. Papa says, 'If you see in in the Sun, it's so.' Please tell me the truth. Is there a Santa Claus?" —Virginia O'Hanlon

In response to the above letter from Virginia, Francis Church wrote a column in the on the spirit of Christmas that has become a perennial classic (http://nanaellen.com/village/cmas/cmas-virginia.htm) this time of year.

If he had received the letter in 2006 instead of 1897, would his answer have been different?

Watching the news last night was a confirmation for me that should have been a wake up call for anyone working in the retail sector. There is a lack of Christmas spirit out there these days, and it is one of the factors driving more traffic out of the malls and onto the Net.

Two of the three business news stories on the national news had a Internet factor to them, and the only business story on the local news was about the drop in foot traffic in stores and the surprising numbers of Internet sales this holiday season.

The Bad News: The Internet is not a passing fad, no matter how much retailers want it to go away.

More Bad News: E-tailers are adapting to retailing faster than retailers are adapting to the Internet.

Even More Bad News: Unless you have got a TRULY UNIQUE product that you control the entire supply and distribution chain of, your retail model is going to be pummeled into oblivion by the Internet.

Even More Bad News Gets Worse: Doctors (http://www.doctorevidence.com/) , Lawyers (http://www.wklaw.com/), and Indian Chiefs (http://www.sevenfeathers.com/) have all developed online business models as the transmogrification of the economy into an e-conomy continues. Even as this happens, there are so many retailers out there not paying attention, it is almost as if they are wearing blinders. So many retail verticals have taken a vicious beating at the hands of the Internet, you would think the survivors would have learned by not to be apathetic.

But they are. The evidence this Christmas season to me is overwhelming proof of…and I can't believe I am actually going to use the quote I first became aware of when it was posted on the wall above the throne of Jim Jones of Guyana infamy; but here goes… "Those who fail to learn the lessons of the past are doomed to repeat them."

I watched a news story where the reporter was interviewing a Sears store manager who was commenting on the less than expected foot traffic. Almost as an after thought, he went on to reassure the reporter his store was doing fine because about 50% of their electronic sales this season are being done over the Internet.

I think one of the main reasons the foot traffic is down is there is nothing special about shopping this season. Retailers are so focused on cutting expenses, not offending anyone with decorations; they have turned Christmas shopping into a very bland experience. The very blandness of the experience is one of the reasons more people are shopping online this season.

I did a very unscientific informal survey of most of my friends and family on shopping this season, and I kept hearing the same things over and over.

"It doesn't feel much like Christmas these days."

But I didn't just take their word for it. Once again at great personal risk, I went to a few large malls, and different malls to see if my past experiences shopping this month still hold true.

Sad to say they do.

There are hardly any distinctly holiday decorations in stores. The few decorations there are in stores these days, are sterile and bland. If there is Holiday music in stores, most stores seem to prefer the Muzak version of Christmas Music - A little to sterile and bland for my tastes.

There as a very distinct lack of holiday apparel worn by the staff in the stores this year. I saw more staff in holiday dress on Halloween than I did in the malls during the last shopping week before Christmas.

In discussing my preliminary findings; a friend of mine in Michigan told me California doesn't count because it is hard to have Christmas spirit when the sun is shining; there's no snow on the ground and people are shopping in shorts and tee shirts. But he grudgingly admitted, he would rather be walking through a parking lot in Los Angeles than one in Detroit this time of year.

I thought to myself, maybe it's an economy thing.

Nope. The news stations and business web sites are reporting that national surveys are indicating consumers will spend about $195 more per family on Christmas this year than they did last year. And the online shopping news confirms this trend.

At the beginning of the shopping season, online sales were forecast to exceed $1 billion dollars. On two days, BLACK FRIDAY (the day after Thanksgiving) and GREEN MONDAY (the last day to guarantee packages will arrive in time) online shoppers spent $772 million dollars. If you take the total sales from the other twenty-two shopping days into consideration, online sales will probably beat the forecast increase of 25% over 2005's online Christmas shopping record.

The majority of the sales went to clicks and bricks stores that did a better job catering to needs of their online traffic, than they did creating a memorable Christmas shopping experience for their walk-in traffic.

And in this atmosphere of Christmas apathy at the retail store level, is planted the seeds of destruction for the Christmas spirit where staff is so afraid of lawsuits they wish customers a "Happy Holiday," if any greeting at all.

How can shopping be meaningful and special when two weeks before Christmas, people are already shopping the early sales for next year's presents and wrap? How can shopping be meaningful and special when one of the top five gifts this season is the Gift Card? No thoughtful consideration required.

How can shopping be meaningful and special when the most frequent Christmas stories on the news this season have been the mall upgrades on parking lot security and shoplifting prevention?

If advertising on TV had a Santa at all, he was marking down prices with a twinkle in his eye; delivering presents while driving a Mercedes, or whining and complaining about the competition he is getting at the mall from a cell phone company.

It's a good thing that Virginia didn't send her famous letter this season, because the answer she would have gotten back would have been a whole lot different.

Surviving A Borg Attack

"We are the Borg. Prepare to be assimilated. Resistance is futile."

That is a great line and Star Trek fans will recognize it instantly. Independent retailers will experience it daily.

A year ago I was driving through a rural area on my way to work with a client and in the middle of a farm field I saw a huge strip mall under construction about half a mile outside a small town.

Talking with people at the gas station/diner/convenience store down the road, they excitedly told me about all the business it was going to attract to the area. I was a little concerned they hadn't thought it all the way through, but I kept my thoughts to myself at the time. I still remember the essence of my conversation with a couple of people at the diner to this day.

"How do you think that mall will benefit this place?" I asked waitress. "All the people coming to the mall will need gas. They may want to eat when they get here or when they leave to go home." Another person offered the comment, "With all those stores, there will be opportunities for new businesses to open up. There will be job opportunities that will keep our young people here"

I hoped they were right but I had my doubts. Opening a strip mall is an expensive proposition. Mall owners are about as risk adverse as any group I know of, so in my mind I made a bet that very few of the stores would be locally owned. Too risky. The mall owners probably had the stores all pre-leased to other big and recognizable names help get construction funding.

I drove back through the area yesterday and feel bad I was right. The mall anchor was a Wal-Mart Super Center. All the other names on the storefront facades were all national chains. The restaurants were all national chains. The gas stations flanking the project were national chains.

I don't doubt for a second that new jobs were created. I just don't think that there were many NEW jobs created. The gas station/diner/convenience store is closed and "AVAILABLE FOR DEVELOPMENT." Driving around town, I noticed there are a number of empty storefronts. So instead of creating a lot of new jobs the mall probably hired the employees from the businesses that closed as a result of the loss of traffic and business to the big names in the mall.

Small retail stores are going to feel like they are under assault by the Borg as this pattern continues. The only way for small independent retailers to survive a Borg assault is to learn how to be everything the Borg are not.

The Borg are not quick or responsive. The Borg have to move at a national pace that has a very long decision trail. To win against the Borg storeowners need to run lean and responsive operations. Keep inventory levels low so you can keep pace with the rapid cycles of the changing tastes of customers.

The Borg are not innovative. Just as size creates the buying power that gives the Borg a competitive edge, it is also their greatest weakness. At the local level, the Borg workforce performs low value add functions such as cashiers, stock clerks, while higher level functions such as advertising, buying, and strategic thinking are performed in the CUBE light years away and out of touch with local conditions.

The Borg are risk adverse. Just as scale of economy works for the Borg, it also works against the Borg. With the size of the purchases they must make to maintain their ONE competitive edge, they can't afford to take risks. This causes bland advertising, and even blander product selection.

The Borg are not integrated into the local community culture. The effectiveness of the Borg is their size which translates into buying power. They use their size to create and support the only real competitive edge they have – pricing power. To win against the Borg learn how compete on every level but price.

The Borg do not develop personal relationships with customers. They just assimilate the available balance on their credit cards and move on. This is the greatest opportunity of all to win against the Borg. Develop relationships with your customers. People buy from friends first before they buy low prices.

As Star Trek fans know, in spite of the Borg's size and power, the fast and nimble win their battles against the Borg more often than not.

Lose it Forward

I didn't plan to spend a lot of time writing about Christmas shopping, but there is an undercurrent of discontent as so many levels or the retail world this season, it needs review from many directions. Here's mine.

While shopping this past weekend I witnessed the seeds of destruction for the New Year Sales being planted. This was big home accessory store, and to drive sales they were having a 50% off sale on all Christmas items. The manager must have been under pressure to get sales levels up higher because he came on the PA system and announced, "take an additional ten percent off on all items purchased between now and closing."

The immediate result was that all customers who had completed their purchases ran back the cash registers and customer service counter and demanded their "additional ten percent off" which resulted in an wave of confusion washing over the cash registers. The check out lines slowed to a crawl as the cashiers had to cancel the previous sales and reenter them manually with the additional discounts.

The next thing that happened is customers began grabbing more Christmas stuff. So now the main stock for the "after Christmas sale" was flying out of the store before Christmas. I heard customers even comment on the fact they are going to get such a jump on next year's Christmas shopping now, they may not have to shop the New Year Sales.

A perfect example of "Lose it Forward."

As I watched, what I began to think of as the "Titanic Sale," continued to slide along the iceberg. Three shoppers who had already paid and left the store, came back after their friends told them about the additional discount. The three of them went to customer service and demanded the additional discount also. The manager approved it.

So now the cashiers are once again tied up canceling sales and re-keying them to reflect the additional discount causing lines to back up again. As people waited in line, two customers abandoned their shopping carts and walked out the store.

However, the floor traffic picked up as two women called several of their friends still shopping in different stores in the complex and told them about the 60% off sale.

Let's go to the root cause of this sale in the first place. To my mind, one of the main reasons sales are down is lack of Christmas spirit in the stores this season. I am not the only one saying it. In addition to numerous business reports saying the same thing, millions of consumers are saying it as well by where they decide to shop.

Most of the reporters are reporting flat to slightly negative floor traffic. The Internet stores are reporting about a 26% increase in sales over this point last year.

With traffic down, the sales are starting earlier this year. By January the public is going to be "sale weary" and traffic will drop further causing the "panic discounts" to get bigger earlier in the shopping period after Christmas and New Year. The newspapers will report another disappointing holiday shopping season – the fifth in a row.

The earlier sales and bigger discounts are going to kick start "Lose it Forward" into high gear as the media begins reporting a lack of "follow through" in January sales numbers as retail floor traffic continues to fall.

Lost & Found

Each time I go into the stores and malls this Christmas season it makes me a little sad because the last thing I see is anything resembling Christmas spirit. This past weekend I had some errands to do so I decided to see if I could find any signs of Christmas spirit while I was at it. I went into several stores and looked. The signs were not good.

Everyone was rushing about and not a smile to be seen anywhere. No one is wearing anything resembling Christmas garb. No Christmas sweaters. No Santa stocking caps. If it wasn't for the unusually full shopping carts and Holiday Themed Sale banners you'd think this was a normal shopping weekend.

I thought to myself, "Maybe it’s a stealth Christmas spirit." So I tested that theory. "Merry Christmas!" I said to a passing shopper. He did a double take and muttered "Thanks." as he moved on down the aisle. I know that scientifically you need more tests to prove a point so I continued to do experiments saying Merry Christmas to all the shoppers that I met on my way through the mall to parking lot. I kept score on the back of an envelope and test results proving the existence of the Christmas spirit did not look good.

Positive Results = 2

Negative Results = 6

Neutral Results = 16

"What?" Or Some Variation = 4

It was beginning to look like Christmas spirit was on life support until I went to pick up a pizza. The store was "over the top" with a huge tree and Christmas decorations. The store smelled like a fresh cut tree. There was Christmas music in the air and as each customer entered they were greeted with an enthusiastic "Merry Christmas" from the staff behind the counter dressed like elves.

The owner was dressed in a Santa hat pushing around a cart, dispensing hot cider; eggnog and home made Christmas cookies to customers while they waited for their pizzas. I looked around at the rest of the people and saw something I didn't see all day - Happy People.

As I sat there and waited for my order, I felt happy. Going with the feeling, I turned to the table next to me and said "Merry Christmas" and four happy people in unison wished me a "Merry Christmas." I turned to the table on the other side of me, and they wished me "Merry Christmas" first.

I watched smiles appear on the faces of customers as they walked in the door and were greeted sincerely by the elves. The owner wished me a "Merry Christmas" again as he refilled my cider.

The waitress beat me to the draw wishing me a "Merry Christmas" as she delivered my order. I experienced more Christmas spirit in a pizza place than I did in the mall.

I am pleased to be able to say there is still Christmas spirit out there, but you just have to look a little harder than days gone by to find it. It is worth the effort. Finding it brought back many pleasant memories of past Christmas seasons. It didn't take much to take Christmas spirit off life support for me. All it took was happy and sincere people wishing one another a heartfelt "Merry Christmas."

The final confirmation for me that commercialism can be done in good taste without spoiling Christmas came with my pizza in a take-home box printed to look like a present. On the box was a red envelope with a card. On the front of the card was picture of the Santa (the owner) and his elves (the staff) holding pizzas with the letters MERRY CHRISTMAS spelled out in Toppings. Inside, the cynic in me was ready for a "spoiling moment" of pure and unadulterated commercialism in the form of an ad or a discount coupon inside the card.

Instead were the following words,

"From our Family to yours this season of Joy and Remembrance."

I started the day looking for something important to me I had feared lost. Just like the first Christmas taking place in a humble stable; I found the Christmas spirit alive and well in a humble pizza place.