Through the retail lens: Department stores disrupted

Kotter EVP Kathy Gersch explores the acceleration of long-needed change

Department stores shone early on as an opportunity for convenience, variety and the adventure of discovery. But the growth of ecommerce, over-expansion of physical footprints, the practice of financing through debt and now COVID-19 have dimmed those lights. What’s next when consumers opt for faster, less frequent and more outcome-oriented shopping amid the discomforts of a pandemic?

Kathy Gersch, former Nordstrom executive and now founder and executive vice president at strategy execution and change management firm Kotter, says opportunity is still present. Here, though, it lies in accelerating shifts that have needed to happen for some time.

As a significant portion of your career has been spent with department stores, what are you watching and expecting on that front? What will it mean for this group to innovate, redirect and maintain relevancy?

Kathy Gersch
Kathy Gersch

The department store sector needs to continue to evolve to meet customer needs and keep up with technology and other advances. Some began evolving a long time ago, and others have not evolved as quickly.

Certain companies financed a lot of their business through debt, resulting in moving toward bankruptcy quickly in these times, because they couldn’t withstand the sudden shutdown of stores and revenue that came with the coronavirus pandemic.

Others are in a slightly different position, but across the board, you’re seeing department stores leveraging this opportunity to accelerate the reduction in their physical footprints. This has provided an opportunity to step back and evaluate and accelerate work that probably would have happened under due course anyway. You’ll see the rightsizing of portfolios as we come out of this. In addition, retailers with more flexible supply chains or more advanced supply chain capabilities have been able to withstand this better than those that do not.

What does “success” mean today for retailers — including department stores — and how has that evolved since the start of ecommerce?

The pandemic has accelerated the adoption of online shopping behaviors dramatically, and I don’t see that going back to pre-pandemic levels. I don’t believe bricks-and-mortar is going away by any means. There will still be a place for it, but that place has long needed to evolve.

The retailers that will succeed will evolve with their consumers and understand that consumers want to engage in a channel-agnostic way.

Bricks-and-mortar plays the role of a more experiential component, an entertainment component, a showroom component, to shopping overall. No retailer will be successful if they see it only as a physical location for store inventory. It has to have a more relevant role for the consumer.

The retailers that will succeed will evolve with their consumers and understand that consumers want to engage in a channel-agnostic way. For consumers, it’s not either/or, but both/and, and in different need states. And they want them all to be seamless. To even talk about channels any more is the thinking of the past.

In the environment we’re in, the service experience and that entertainment piece that’s part of going into a physical store is tempered when we’re wearing masks and needing to social distance. It doesn’t feel as fun. That’s part of why online and mobile commerce will continue to be a bigger share of wallet.

How can retail leaders most effectively communicate with employees about the current and future state of business in light of COVID-19?

Innovative and smart retailers will be putting their time, effort and money into truly preparing their employees for what this is going to look like — and I don’t mean just what new rules are. They of course need to let employees know the rules around spacing, and mask requirements, and how transactions are going to be handled. All of those nuts and bolts are important.

But more importantly, there is the question of preparing your employees for the new, awkward situations they’re finding themselves in. If masks are required, some people won’t have them. We’ve already seen video of fights in the retail environment. So how does a person who, in the past, would have been more focused on serving customers and helping them find the product or size they wanted, move into much more of a policing role?

It puts them in a situation where they could be uncomfortable if they’re not properly prepared. You still want everyone to have a great experience in the store, but now they need to be minded in a completely different way.

If employees feel uncomfortable, then the environment will feel tense. It’s important to invest the time in helping employees feel comfortable and putting them in situational training so they can understand the predicaments they might face.

People right now are craving authentic, transparent leadership and open communication. They don’t have time for a leader who is just trying to say the right thing but doesn’t really mean it. You’re going to come across as wishy washy if you say one thing and then do another.

However, if you say, ‘This is new for all us, the rules of engagement keep changing, this is what we know for now, and you’ll be the first to know when we need to change this,’ that’s going to put people more at ease. There’s not a person on this planet who can tell you, with any level of confidence, exactly what’s going to happen a month from now.

It’s an emotional roller coaster for everyone and a lot to be managing through right now. But being transparent, engaging and communicating often, rather than trying to have the perfect answer, is the better approach.

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