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.

The Season of Giving

Last week I heard about Macy’s Make a Wish campaign for the holiday season.  The spokesperson said, “We know that people like to write letters to Santa so this year  Macy’s will donate $1 to the Make a Wish Foundation for each letter Santa receives at Macy‘s.  Bring a letter written to Santa to any Macy’s store throughout the country and drop it in the Letters to Santa box.”

A couple days later I heard a story about a local restaurant which was donating an entire day’s revenue so that children who might not receive gifts would do so.  Yesterday I heard a follow-up story.  The reporter stated that the restaurant had donated its entire day’s sales, not the profits but the sales.  The amount was $6000.  Another $1000 was raised through donations from the day’s patrons.  That is a substantial contribution from both the patrons and the restaurant. 

These are excellent examples of cause marketing.  As the name implies, cause marketing connects a business with a cause.  The business attempts to help the cause, generally by raising funds, and, in doing so, the business receives positive publicity.  In this season of giving, opportunities for cause marketing abound.

Cause marketing offers a wonderful return for both the business and the cause.  Keep in mind that while cause marketing involves a charitable contribution it also is marketing.  That means the business must get something out of the effort.  The business must receive a positive communication about making the contribution.  If it does not, marketing was not involved.  The exercise was merely a contribution to a cause.     

If you are thinking of participating in cause marketing, here are three factors that will make your efforts successful.  First, layout a program that gets customers into your business.  Notice that Macy’s asked customers to drop off letters to Santa.  The retailer did not require a purchase to do so.  Likely, Macy’s has positioned the drop box at the back of the store so that customers will walk the length of the store to reach it.  This is done in hopes that some merchandise will attract customers’ attention on the way, and they will make a purchase. 

The local restaurant actually gave all the revenue from customers’ meals.  In order to participate, customers had to come to the restaurant and order something.  They had to buy.  The restaurant in essence gave away the costs and profits of the operation for that day, but the customers sampled the fare with their purchases.  Hopefully, that will prompt them to return. 

Second, send out a press release so that your business gets initial press on the project.  Let the public know before the event takes place or the promotion kicks off that it is happening.  This gives your business publicity and generates participation.  If you are putting time and effort into the cause, you want to maximize people knowing about it, don’t you?

Third, do a follow-up release so that the press can report what happened.  This promotes the cause, makes participants feel good, and gives your business additional positive exposure.  Skipping this important step will significantly reduce the impact of your cause marketing. 

If you decide to do cause marketing, follow these three steps.  Your business will receive positive publicity, and the cause will benefit, too.