Canadian Tire posted profits down 68% this week. Last week, Indigo posted profits down 70%. The same week, Cineplex announced that they lost $9.0 Million versus a profit of over $10.0 Million last year. Who knows how many more will present similar results? And while, as the saying goes, misery enjoys company...that isn't a strategy for survival.
Is it the economy, the brand, a debt-driven consumer market tapped out? What we heard from Canadian Tire sees their brand as a bellwether. However, what is clear is that these brands and many others faced a very different holiday season and consumers.
So the question is, how do you survive in this marketplace in 2024 with uncertainties and challenges such as...
1. Consumers are looking for deals on everything.
2. Consider discretionary spending has been cut by 50-75%
3. Major competitors will look at writing down inventory and provide heavier discounts.
4. Expect price deflation to hit hard, and you’ll need to respond in kind.
5. E-commerce and AI will dominate every effort to keep revenue higher. Watch what Walmart does. I believe they’ve seen this coming.
6. You’ll have to fight aggressively through to the third quarter of this year.
7. 2025 will be the recovery. Expect continued hyper-competition for consumer share.
If I wanted to run a company again, what would I do in a scenario like this?
Let's presume I am back in a growing mid-sized retailer. My message to the board and management would layout the following:
Expect a hyper-competitive response from larger and stronger players. What does that mean? Retailers that have AI capabilities will be able to identify trends and opportunities faster than competitors with underdeveloped skills and resources. That really will split up the herd.
The first thing I am going to tell you to do is forget about trying things you are not going to be able to invest in or, worse, are unable to execute in this economy. Keep them on hold till we get out of this.
The second thing I will ask staff to focus on is our strengths—marketing, products, pricing, merchandising, e-commerce, and messaging internally and externally. What risks do we face with each, and how quickly can we address them? And what are the timelines?
Third, where can we save money to improve and increase our communication capabilities? We need a full launch attack on reaching existing and gaining new customers. Digital efforts offer overlooked revenue and profit drivers. It's called DATA. Soon, it will be on our balance sheets as an asset. We need to grow and protect it.
Fourth, do not decrease speed or spending on our data collection and curation capabilities. Identify and invest in the right AI algorithm. Continue to focus on what we want AI to deliver and implement Generalized Pre-Trained Transformers for home office staff to get used to and use with AI when it is available. That should be in place by the third quarter of 2024.
Fifth, better predictions and decision-making must be our new competitive advantage.
Six, market visibility, analyzing our traffic patterns, and understanding where shifts are happening. And if we are not visible, determine why and create incremental response plans. That should include hybrid events driven by unique, experiential shopping opportunities that blend the physical and digital realms.
Seven, no matter what anyone says, we still have to tell and sell our brand story. It needs to be in every physical and digital interaction.
Eight, we don't chase the future when it comes to innovation. We invent it! Innovation will be our outcome, so we don't chase everyone else ideas. It's great that they have lights and a magic show but can they deliver great products and service consistently? That will be our internal brand strength.
Nine, localization, not all markets have the same demographics; we need to respond to that with our product and price offerings.
Ten, our ecommerce platform needs to become more engaging. We should have a voice chatbot working on our site, and it needs to be able to introduce, make suggestions, and close the sale.
Without having to go into greater detail and needing to make this part of the list. We need to live by our Vision and Values. In addition to ensuring that we look after our people and provide them with more modern means to engage customers and close sales. Products don't sell themselves; people do. We must tell and sell the brand story every day. It creates cohesiveness and the open door to continuously improve.
George Minakakis advises organizations, their senior leaders, and board directors. He is a keynote speaker. A thought leader in creating stronger value propositions, leading change, the transformative power of artificial intelligence, and winning in foreign markets.
He is also a former senior executive with Luxottica and Pepsico, having been Country Manager and CEO in Canada, the USA, and China. He is also a trained board director and holds the chair position within an electric utility.
For inquiries, George can be reached at gminakakis@inceptionretailgroup.com