Sign of the Times 2

So once again I find myself being forced to go on a business trip to Miami. Having learned my lesson last time (see Sign of the Times in Archives: Nov 2006), I decided to fly Southwest into Ft. Lauderdale.

Honestly the Super Bowl had absolutely nothing to do with the timing of my trip.

As I pulled up to curbside checkin, I again noticed the line for Southwest was double and more the line for the other carrier I flew to Miami last time, but I was not afraid. With my new perspective I saw why the Southwest curbside line moved so fast – Southwest had six people working the curbside checkin instead of two for the other carrier. Just to keep score, I paced myself against a person who arrived at the other checkin. By the time I was cleared there were three people ahead of him. This was a good sign.

Thanks to Southwest's aggressive fuel hedging strategies, I was able to check in a 57 pound suitcase with clothes for two weeks without public humiliation. This was a good sign.

Once again I was taking an evening flight across the country. The flight left on time. This was a good sign.

Unlike my previous trip, I was surprised to learn that I was going to be on the same plane all the way. That was new and different for a seasoned Southwest flyer who is used to at least two plane changes going from west coast to east coast. This was a VERY GOOD sign.

While reading the in flight magazine I learned that Southwest now flies to Hawaii. In view of the turmoil affecting the rest of the carriers flying to Hawaii I thought this was a very good sign for me, but is going to be a very bad sign for the carriers who have been abusing passengers going to Hawaii for years.

The last time I flew to Miami, I was not allowed to bring a submarine sandwich and coffee on board because it was dangerous. About the only thing I saw that was dangerous, was the fat gram and the sodium levels. But the FAA was sure that there was a possibility that I could have used the sandwich to beat the aircrew into submission and taken over the flight.

So this time I didn’t buy a sandwich and felt like an idiot as the rest of the seasoned Southwest fliers paraded onto the plane carrying sandwiches, pizzas, Chinese plate dinners and coffee. All I was going to have eat for the long haul would be a couple bags of airline peanuts. This was not a good sign, but I blame this one on stupidity of the same person that banned toe nail clippers as a threat to national security.

The flight left LAX on time and everything was smooth sailing until we got to Texas and we encountered turbulence. There always seems to be turbulence over Texas so it was no big thing as far as I was concerned. As usual, the beverage service was stopped before the got to me. But before I could get too upset, the pilots just took the plane up to 41,000 feet until they were over the turbulence and then the beverage service continued. This was a good sign.

Of course there is no movie on a Southwest flight, but the seat and the reading light worked. I had a good book, and glass of passable wine. This was a good sign.

I got to Ft. Lauderdale. It was dark. It was late. It was raining. It always seems to be raining whenever I go to Florida. I am still waiting for proof the motto "The Sunshine State" on the license plates is justified.

Unlike Miami, the car rental concession is connected to the terminal, so I was able to make my way dry and unaccosted to my rental car. No panhandlers, no verbal abuse, no flashing. This was a good sign.

Judging Books by Their Covers

The reason it has taken me so long to post a comment on shopping, is the fact I have gone this long without doing anything other than grocery shopping. That changed this past weekend when I started looking at new cars.

I like bargains just as much as anyone else. So when I shop for a new car, I buy last year's model. To me, the very minor differences in this year's model are more than offset by the substantial discounts on last year's model, which plays into the hands of the advertising guru for the dealerships.

I went back to the dealership where I bought my last car and requested my former salesperson only to learn she was gone. I wanted to buy from her again, because she was so professional it made me want to come back. She was gone and now I was back to square one: "Whom to buy from?"

I asked my friends who have "recently" bought new cars looking for a salesperson they could recommend and got nothing but tales of bad, miserable, and frustrating car shopping experiences.

So I went to an auto mall and first dealership I went to was amazingly insulting on so many levels, it would've been very upsetting if I weren't a consultant who could use the experience as a good example of "bad salesmanship." Let's look at all the levels the dealership wasted money on marketing.

STRIKE ONE: There's an old saying: "You never get a second chance to make a good first impression." And this dealer team worked very hard to create a bad one with me. As I drove in I saw what I was expecting to see; the usual line of sharks waiting their turn.

But want made this memorable; in a bad way, was the way a salesperson "high fived" the rest of the line up as he made he way towards me.

STRIKE TWO: The salesperson took all of 90 SECONDS before suggesting very strongly we get me "pre-qualified on financing first" to make sure "we": don't waste time (looking at cars I can't afford). Since he did absolutely NO QUALIFYING on me at this point, how could he assume:

a) to know what I could or couldn't afford.

b) that I wasn't a cash buyer. They do exist.

c) that I didn't already have financing in place.

STRIKE THREE: I came in because I am looking for a 2006, and they were advertising a clearance sale on the older models. When I mentioned I wanted to look at the 2006's, the salesperson, implied I would be making a big mistake and kept extolling the virtues of the 2007 models over the 2006 models.

I had been on the lot for less than five minutes, and I was ready to leave. Needless to say, I didn't buy there and probably never will. The experience was so bad, I probably will never be coming back to the dealership, so they have lost me forever. If anyone asks me where to go, I will tell them where not to go.

So all the money the dealer spent getting me in the door has now gone down the drain because of a salesperson who was more interested in telling me what I want than asking me what I want.

Now to be fair to him, let's look at the first few minutes of the encounter from his point of view, because maybe I didn't impress him as a good customer. After all I drove up in a 1977 Toyota Landcruiser. It is a mountain truck that looks like it gets heavy use – which it does. Maybe he decided based on my clothing. I was wearing jeans, tee shirt and sneakers. Maybe he decided my fixation on "last year's" model implied I didn't have much money to spend.

Should any of this excuse his behavior? NO.

One of the oldest sayings in retail is "Never judge a book by it's cover." and it is so true. Back many years ago when I was in securities, an old man came into the office in stained khakis, a polo shirt with a hole in it and slippers. The broker who was taking "walk ins" that day called me and asked me to cover the front desk so he could take a cigarette break.

As soon as I got to the desk and looked through the glass doors, I saw why the other broker suddenly needed a cigarette. I didn't smoke or I might have been tempted to call someone else before the old man got in the door. But I was bored, it was lunch time and I thought this would be a good way to kill some time; and in the process learned the value of never judging a book by it's cover.

I followed my training and did a full presentation and took time to answer all his questions. After about 45 minutes he thanked me, took the information kit and told me he would think about it. I thought nothing of it until I was called to the front desk the following day to greet a visitor, and there was the old man – still dressed in khakis – with someone who turned out to be his CPA.

The old man was impressed with my patience answering his questions and opened a securities account with me for a very impressive amount. The other broker made a half-hearted attempt to split the account with me to no avail.

During my time in securities, I made a lot of money working with the old man and his wealthy friends all because I didn't judge a book by its cover.

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.