Stuck in the Middle with You

An end-of-supply chain perspective

Retail Reflections_2017

A song from back in the day, by Stealers Wheel, was called “Stuck in the Middle with You.” While the lyrics of the song seemingly have nothing to do with today’s retail environment, it could serve as the theme song for the drama playing out among many current retailers. And, if we take a look at some once-successful general merchandisers, there may be some hard lessons to be learned. More importantly, it may foreshadow the fate of a few of today’s food retailers.

The poster child for the case I will make is Sears. At one time, over 90 percent of the American buying public shop-ped at Sears, either at stores or through its catalogue. Even Walmart, with its current retail penetration, can’t boast of market share like that! Yet not a day goes by without a retail analyst speculating on when Sears will file for bankruptcy or go away all together. And Sears is not alone. Macy’s is struggling, apparel retailers by the dozens are closing, Blockbuster Video is gone, and the list goes on. What happened?

In my experience, there are three areas of business excellence, and it is necessary to dominate at least one of them to remain relevant. Dominate two or more, and you can drive market share. They are: (1) operational excellence—generally manifests itself in price; (2) product excellence— generally manifests itself in assortment and product innovation; and (3) service excellence—generally manifests itself in the shopping experience.

In the case of Sears, it was the “place where America shopped” (product excellence) and stores were supported by the catalogue business, which provided a level of service competitors couldn’t touch (service excellence)—so it thrived.

But then came K-Mart and later Wal-Mart, focused on price (operational excellence) and department stores like Nordstrom promoting an outstanding shopping experience (service excellence). Throw in club stores like Costco (product excellence), and category killers like Home Depot (product excellence) and what happens? Sears ends up in the middle.

Now I fully acknowledge retail analysts can point to many other factors that contributed to Sears’ demise, but it doesn’t dim the point. In business, being “stuck in the middle” is not where a company wants to be. Could this be happening with traditional food retailers?

Walmart drove tremendous market share with its supercenters; not only did these stores have “Always Low Prices” (operational excellence) but they were a “one-stop shopping” experience (service excellence). Whole Foods, on the other hand, delivered outstanding products (product excellence) with a fabulous shopping experience (service excellence). Then along comes Amazon— a retailer that totally redefined service excellence (sit at home and have your order delivered), product excellence (a virtual unlimited product assortment), and…oh yes…it acquires Whole Foods.

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