The Invisible Changing Business Environment

I am very worried about every small businessperson.  We operate in several dynamic environments that are changing, and most of us are too busy to keep up with them.  Some environments are invisible, which makes their impact even trickier to detect.  One way to track them is to watch big businesses and notice how they are responding to these environments.  Big businesses have more staff, do more research, and make more decisions based on research.  Taking note of their research and response to it helps to reveal the effects of the invisible.

The invisible environment I am addressing today is the Internet.  After the holidays, several news organizations reported that big retailers including Macy’s, Kohls, Walmart, and Sears would be closing stores this year.  In the stories, these changes were tied to a 5.6% drop in sales during the holiday season.  While online sales grew during the holidays, brick and mortar stores sales were down. 

I did some research into the situation and discovered that these decisions regarding store closings were not knee jerk reactions to a bad holiday season.  Last August Macy’s had planned to close 100 stores in 2017, which is 15% of the chain’s total.  CEO Jeff Gennette stated that “Nearly all stores to be closed positively cash flow today, but their volume has been steadily declining in recent years.  We decided to close these stores proactively to invest in growth sooner and more aggressively in digital and mobile.”

In other words, the stores’ profitability today was not the issue.  The trend was the issue. 

Big chain stores were built to offer a convenient place to shop for a wide variety of items.  Now the Internet has made the big stores’ convenience and wide variety irrelevant.  Consumers can more easily go online and shop with their fingers than get into the car, drive to the store, and hope to find the item they want.  As is demonstrated by holiday sales, more shopping is happening online now than ever.  The trend shows no sign of stopping. 

This environmental change is affecting the sales of big chains’ brick and mortar stores.  In addition to Macy’s, Sears and Kmart are closing 30 stores, and CVS is closing 70 this year.  Over the past couple of years, the big chains have closed hundreds of stores.  Their loss will impact malls.  The loss of an anchor store to a mall such as Macy’s or Sears triggers a downward spiral in the performance of the mall that puts it in danger of closing, too.  Right now, two hundred malls are in this position.

Interestingly, specialty stores are not experiencing the difficulty of the big chains.  This is due partly to their focus on a product rather than convenience.  They also have a successful online presence.  For example, Victoria’s Secret gets 20% of its sales online. 

In this Insight, I have been focusing on how the Internet is affecting big retail chains.  If you are thinking, my business is not a big retail chain so this doesn’t apply to me, you are wrong.  I absolutely guarantee the Internet will affect your business in some way.  Some businesses might be threatened with extinction, and others may be altered in a milder fashion.  All will be impacted.  The extent of the effect may change over time, too.

How do you address the invisible changing environment of the Internet?  Be certain to conduct a SWOT for your business every year.  The O stands for external opportunities, and the T represents external threats.  The Internet offers both to every business.  How you identify and react to the opportunities and the threats from the Internet will determine its effect on your business.  If your customers are leaving your business to shop online, what can you do to keep their business?  Do you have an online presence?  Do your customers know of it?

Does it offer them what they want?

This week's marketing trivia challenge is What threats and opportunities does the Internet offer your business?  E-mail me your answer.

My Two Favorite Holiday Commercials

This year my two favorite holiday commercials feature a magical reindeer and a choked-up grandma.  One is a very well-acted commercial with a father attempting to ignite the holiday spirit in his disinterested son.  In desperation, he drives his son into the country.  “Your mom and I thought you might like this,” he offers as the commercial opens.  “My dad brought me out here when…”

Noticing the ear buds in his son‘s ears, he stops.  “Anyway…”

They arrive at their destination and walk through the trees to a clearing where an older man with a beard is putting down hay for several reindeer.  One large reindeer runs up to the boy, stops, snorts, looks the boy in the eye, turns suddenly, and leaps high into the fog.   As the music “I get a trace magic” cues up, the boy exclaims, “Dad, did you see that?” 

His dad, who had already turned and was walking away, smiles.  Excited, the boy runs after him.  “Dad!  Dad!  Wait up!”

The Kohls logo comes on screen as they interact.  If you haven’t seen it, go here now.

My other favorite commercial begins with a young woman pulling out a 45 vinyl record labeled Voice-o-Graph.  She plays it and hears her grandmother saying to her grandfather who was in the service at the time, “My darling Raymond, though you can’t be here for the holidays, we’ll always be together in my heart.” 

Then her grandmother sings, “Our Love Is Here to Stay.”

Using her Mac, the granddaughter works on creating a duet to that song with her grandmother.  Christmas morning, she leaves a cell phone on the kitchen table with a note “Press play.”  Her grandmother finds this, sits down, puts in the ear buds, and presses play.  Grandmother’s tearful reaction to the song chokes me up every time I see it.  If you haven’t seen this commercial and want to, go here. 

Both of these commercials elicit emotion, and that is their strength.  They tap into the magic and family memories of the holidays.  Many call these commercials institutional or image because they do not directly sell.  However the Mac commercial did a good job of prominently featuring the laptop as the girl was working on the duet.  She showed the laptop’s capabilities to record the Voice-o-Graph, guitar background, and her singing.  With her final product on the cell, she communicated that she combined all these together using the laptop.  In each of her scenes, the Apple logo was very apparent.   

On the other hand, the Kohls logo was only displayed at the beginning and the end of the commercial.  The company would have received more credit for the commercial and more connection with it had the logo been displayed in a lower corner throughout.  When you do an image commercial, do everything possible to connect your company with the commercial in the customer’s mind. 

This week's marketing trivia challenge is What is your favorite holiday commercial and why?  E-mail me your answer.