The New Rules of Retail: Competing in the World's Toughest Marketplace by Robin Lewis, Michael Dart |, Hardcover | Barnes & Noble
The New Rules of Retail: Competing in the World's Toughest Marketplace
  • Alternative view 1 of The New Rules of Retail: Competing in the World's Toughest Marketplace
  • Alternative view 2 of The New Rules of Retail: Competing in the World's Toughest Marketplace
  • Alternative view 3 of The New Rules of Retail: Competing in the World's Toughest Marketplace
<Previous >Next

The New Rules of Retail: Competing in the World's Toughest Marketplace

by Robin Lewis, Michael Dart
     
 

View All Available Formats & Editions


In The New Rules of Retail , industry gurus Robin Lewis and Michael Dart explained how unprecedented consumer power, enabled by technology and globalization, is revolutionizing retail. They warned that survival in these dynamic times called for a business model based on three distinct competencies: preemptive, perpetual distribution; a neurological

Overview


In The New Rules of Retail , industry gurus Robin Lewis and Michael Dart explained how unprecedented consumer power, enabled by technology and globalization, is revolutionizing retail. They warned that survival in these dynamic times called for a business model based on three distinct competencies: preemptive, perpetual distribution; a neurological customer connection; and total control of the value chain. In the years since that book published, many of their predictions have come true. Now, they revisit timeless case studies like Ralph Lauren and Sears, as well as new additions like Trader Joe's, Lululemon, and Warby Parker, to assess how retailers must continue to evolve in the era of e-commerce, data mining, and tiered distribution. They also identify the five current trends that are currently driving consumer demand, including technology integration and channel consolidation, as exemplified by Jeff Bezos at Amazon. This is a fully revised and updated guide from two proven retail prognosticators.

Editorial Reviews

From the Publisher

“Takes a real approach to describe why some retailers prospered and others failed through each wave of retail history. Lewis and Dart's use of case examples brings the book to life, clearly spelling out how customers and the competitive environment have changed and how retailers today must connect with their customers and take control of their value chain to not only be successful, but survive.” —Ken Hicks, chairman and CEO, Foot Locker, Inc., and former COO of JCPenney

The New Rules of Retail: Competing in the World's Toughest Marketplace is an important and instructive read for industry veterans and newcomers alike. Lewis and Dart provide a practical roadmap for success in the rapidly evolving environment, along with an assessment of the retailers who ‘get it.' With the authors' dire prediction that 50 percent of retailers will be unable to survive the transition to Wave III, this is a must-read for everyone in the business today!” —Jane Elfers, president and CEO, The Children’s Place

“This book is an essential read for anyone who is interested in a history of what drives 70 percent of the U.S. economy and the many challenges expected to be faced in the future. Like we are now seeing in politics, the voter/consumer is in the driver's seat, and those serving her had better take heed.” —Allen Questrom, former CEO, JCPenney, Federated Department Stores, and Barney’s

The New Rules of Retail is a must-read for students of contemporary retailing. Full of meaningful insights about the current environment, the authors chart the course for a successful retail future.” —Paul Charron, former CEO of Liz Claiborne

“Lewis and Dart have written an interesting and thoroughly researched book that traces the evolution of the retail business from the distant past to the looming future. Clearly, they know and understand all the players—well worth reading.” —Marvin Traub, former president and CEO, Bloomingdales

The New Rules of Retail is an incredibly interesting and a provocative read. I thoroughly enjoyed the authors' insight on past events. I look forward to debate and dialogue about their predictions for the future.” —Tom Wyatt, president, Old Navy

“Lewis and Dart give a very accurate view of the past history of retailing. But more importantly, they offer an insightful and strategic view of the consumers and business models needed to support its future.” —Claudio Del Vecchio, CEO, Brooks Brothers

The New Rules of Retail shows how to win in an unprecedented environment where consumers have instant access to hundreds of choices for everything they need. Lewis and Dart's recommendations are dramatic, but they show that the consequences for those who stick with the status quo will be dire. A highly original and insightful book.” —Mark Sarvary, CEO, Tempur-Pedic International Inc

“Lewis and Dart have so many thought-provoking ideas that I used up a box of paper clips marking the pages I wanted my various department heads to read. And they’re easy to follow—I understood the concept of a ‘neurologically connective experience’ right away. All future decisions in retailing and wholesaling will be influenced by this book.” —Bud Konheim, CEO, Nicole Miller

“Lewis and Dart have so many thought-provoking ideas that I used up a box of paper clips marking the pages I wanted my various department heads to read. And they’re easy to follow—I understood the concept of a ‘neurologically connective experience’ right away. All future decisions in retailing and wholesaling will be influenced by this book.” —Bud Konheim, CEO, Nicole Miller

“Lewis and Dart have shown once again that they have their fingers on the pulse of both consumer needs and the ever-changing retail industry. The New Rules of Retail is a must-read for anyone who wants to not only survive but to thrive in the decades to come.” —Kevin M. Burke, president and CEO, American Apparel & Footwear Association

The New Rules of Retail is a powerful analysis of the tectonic shifts that have transformed this industry, and it reveals the secrets of succeeding in today's new economic and digital environment. Authors Robin Lewis and Michael Dart know retailing inside and out and their thought-provoking book, with its incisive perspective, proves it.” —Tracy Mullin, former president and CEO, National Retail Federation

CEO Envirosell Inc. and author of Why We Buy: Paco Underhill

This book is much too interesting to be bedtime reading. The New Rule of Retail is fascinating and a little frightening vision of our consumptive future. While not apocalyptic, it is stark and powerfully real. If you are a merchant or marketer, this is your up-wake call.

Product Details

ISBN-13:
9781137279262
Publisher:
St. Martin's Press
Publication date:
08/12/2014
Edition description:
Second Edition, Revised and Updated, Second Edition
Pages:
272
Sales rank:
207,372
Product dimensions:
6.50(w) x 9.30(h) x 1.10(d)

Read an Excerpt

The New Rules of Retail

Competing in the World's Toughest Marketplace


By Robin Lewis Michael Dart

Palgrave Macmillan

Copyright © 2014 Robin Lewis and Michael Dart
All rights reserved.
ISBN: 978-1-137-48089-7



CHAPTER 1

WAVE I

PRODUCER POWER


The Emergence of Organized Retail

In the late 1800s, the population of the United States was about 60 million, spread out across thirty-eight states, with 65 percent living on farms or in small towns. There were only a dozen or so cities with 200,000 or more residents, and yearly national income was about $10 billion. The Wild West was still wild, even as rail was being laid to follow the migrating population.

Despite suffering from the "Long Depression" — not as deep as the Great Depression, but longer, stretching from 1873 to 1897 — the country nevertheless generated enough capital to spawn the so-called Gilded Age (1865–1900), with its infamous industrialist tycoons (called "robber barons" by some) like Jay Gould, John D. Rockefeller, Leland Stanford, Andrew Carnegie and many others, who built our railroads, drilled and distributed our oil, made our steel, launched our banking system and built the foundations of our manufacturing infrastructure. America was just beginning to understand how to harness the use of electricity and new industrial processes to accelerate production in order to provide the growing population with the products and services it really needed.

The phonograph, typewriter, telephone and electric light were introduced, and after Karl Benz's invention of the first combustion-engine automobile in Germany in 1886, Henry Ford created the Model T Ford, ultimately replacing horse-drawn carriages. In 1913, Ford developed the concept of the assembly line, for which he was labeled the father of mass production. By the Roaring Twenties, Ford was selling hundreds of thousands of Model Ts, and still he couldn't keep up with demand.

Compare that to today, when every household has two or three cars in the driveway, yet the Big Three — General Motors, Ford and Chrysler — are not only cutting capacity but also fighting numerous global competitors for market share.

Ford's inability to keep up with demand in the 1920s occurred for several reasons. During the early years of Wave I in the mid-nineteenth century and well past the turn of the century, the period of vast industrialization, transportation and communications infrastructure-building was still in its infancy. There was limited access to goods and services because supply-side growth could not keep up with growing consumer demand. This was exacerbated by an embryonic and fragmented distribution structure and a continuously migrating population, both from east to west and from rural to urban areas. Moreover, even when there was sufficient supply, its distribution was at best uneven and inefficient, at worst nonexistent.

Other innovations were happening as well. A young German immigrant named Levi Strauss moved from New York to San Francisco to open a dry-goods store selling his newly designed rugged cotton twill pants, or blue jeans, to gold miners and farmers. Dr. John Pemberton concocted a mixture called Coca-Cola and sold it in a pharmacy in Atlanta as a tonic.

New ideas were sprouting up overseas, too. In 1856 Thomas Burberry launched a company in Hampshire, England, that would debut on the world stage in 1914 when the British War Office commissioned it to redesign the classic military officer's coat. After World War I, the trench coat caught on as a fashion item, and would become the icon of the Burberry brand for decades to come.

It was also during this time — which is considered, not coincidentally, the beginning of America's rise to global economic dominance — that two retail distribution models were conceived that would replace the then-dominant general store: the department store and the mail-order catalog.


Sears and Montgomery Ward in Wave I

Following a brief stint in the watch business, Richard Sears partnered with Alvah Roebuck in 1886 to form the classic American retailer Sears, Roebuck and Co. By 1895 it was heavily into the mail-order business, primarily targeting farmers and small-town residents, who made up the majority of the population during that period, and who had limited access to stores. It would grow bigger and succeed longer than Montgomery Ward, founded by Aaron Ward in 1872 and known affectionately for decades as "Monkey Ward's." Ward's would eventually succumb to the marketplace challenges of Wave II, as we will discuss later.

These catalogs demonstrated a brilliant distribution strategy: placing their "store" and all their products directly in the homes of all those farmers and people scattered across the country in small towns. These were people who needed things and had no other place to get them. In the truest sense of the old adage "location, location, location," these catalogs were in the consumer's face, in his living room, faster and more frequently than people's monthly treks from the farm to the general store in a town many miles away. Indeed, these companies' vision of bringing their value to the consumer was one of retailing's early and competitively innovative distribution strategies.

The Sears catalog would eventually grow to more than five hundred pages, offering everything from the cradle you rocked your babies in to the coffin you were buried in. You could even buy a readymade home with everything in it.

Today, of course, the Internet is the new catalog; however, it is not a replacement for the "old," but one of many additional distribution platforms: mobile electronic devices, kiosks, vending machines, airport stores, door-to-door selling, in-home selling events and ubiquitous stores on virtually every corner, to name a few. We live in an age of consumers having total accessibility. Therefore, retail success can no longer be just about "location, location, location."

In the early 1920s, as the population began migrating from farms to small towns, Sears and Montgomery Ward, continuing their distribution strategy of following the consumer, began opening stores in those towns. Now they had a multichannel distribution strategy, with both catalogs and stores, as well as the unique competitive advantage of offering high-quality essentials for fair and credible prices. They thus positioned themselves as the go-to stores for the growing middle class, a niche not competed for by the department stores that were growing rapidly in big cities.


The Department Stores: "Build It and They Will Come"

In 1846, an Irish-American entrepreneur named Alexander Turney Stewart opened a soft-goods store called the Marble Palace that sold European goods. Later, it would evolve into Stewart's Department Store, selling apparel, accessories, carpets, glass and china, toys and sports equipment.

In 1856, Marshall Field & Company was launched in Chicago. In 1858, Macy's was founded in New York City, followed by B. Altman, Lord & Taylor, McCreary's and Abraham & Straus. John Wanamaker opened the first Wanamaker's in Philadelphia in 1877. Zion's Cooperative Mercantile Institution (ZCMI) was opened in Salt Lake City in 1869 and became the first incorporated department store in 1870. Hudson's opened in Detroit in 1881, and Dayton's in 1902 in Minneapolis.

These and many others, most of which grew out of small general stores at the same time that their small towns became cities, would become the most dominant retail segment until well into Wave II (generally defined as 1950–2000).

These Wave I department stores were called "cathedrals" and "palaces of consumption" at the time. They became daylong outing destinations for families, at first because of their breadth of offerings, and later because of the additional sponsored entertainment, children's events, fashion shows, restaurants and more. Many of these palaces were also architecturally beautiful, using new building materials, glass technology and new heating, among other innovations.

In 1891, French entrepreneurs Joseph Tron and Joseph Léautaud opened the first "El Palacio de Hierro," or "Iron Palace," department store, selling European imported fabrics, soap and other "luxury items" in Mexico City's now-historic Zócalo Square.

In the late 1890s Kendals (now House of Fraser) and Harrods opened their first stores in Manchester and London. In Paris, two cousins, Théophile Bader and Alphonse Kahn, opened a fashion store at the corner of rue La Fayette and the Chaussée d'Antin. Over the next decade and a half they would buy up surrounding buildings and expand Galeries Lafayette's product offerings to include home goods, gifts, toys and more.

Burgeoning retail industries began springing up in Asia, the Middle East and other parts of the world, many of which still are still dominated by the Wave I model. However, in those places the Wave II through IV evolution will occur much more quickly than it did in the United States and Europe.

Indeed, the line from the movie Field of Dreams, usually misquoted as "If you build it, they will come," perfectly describes the juxtaposition between the department-store distribution strategy and Sears' and Ward's original distribution model of following, and bringing their value to, the consumer.

We need look no further than what department stores became in Wave III, big stores loaded with so much merchandise that they were a daunting challenge for consumers. The contrast illuminates how the scarcity of competition and growing demand in Wave I provided these stores with enough pricing power, and therefore profit margins, to be able to afford all the compelling amenities that made them not just stores, but entertainment destinations.

The shifting balance between supply and demand, and how it drives changes in retail distribution models and in what it takes to be successful, is fundamental to our thesis, as we follow retail's evolution through Waves II, III and IV. Just as the early catalogs and department stores were innovative new distribution models responding to the supply-and-demand equation of the time and to real consumer needs, so too were their successors.


Ramping Up to Wave II

Despite the Great Depression, the period of Wave I from the early 1900s through World War II was one of positive economic growth, thanks to industrialization. The huge expansion of highways and railroads — indeed, of all transportation and communications — marked the birth of a modern distribution infrastructure, all centered on the growing population and its migration to the cities and suburbs.

Fueled by the growing use of innovative processes, assembly-line manufacturing and electricity, the supply side of the economy (products and services) could finally try to catch up to consumer demand. There was tremendous growth in housing, new household appliances and, of course, automobiles. All this growth would survive the severe downturn of the Great Depression and would presage the truly explosive growth after World War II and during Wave II.

Meanwhile, the retail industry continued its inexorable march on to Wave II. In 1902, James Cash Penney launched JCPenney, which would be incorporated in 1913. Despite initially offering only soft goods, and without catalog distribution, JCPenney quickly became a fierce competitor of both Sears and Montgomery Ward, with all three rapidly opening stores in small towns and suburbs, chasing after the growing American middle class. JCPenney, like its predecessors, offered high-quality basic products for a good value. This value model was exactly what enabled all three competitors to continue growing even through the Depression.

Following World War II and the subsequent explosive economic growth, Sears expanded upon its distribution strategy, following the migration of consumers to the suburbs, where it built and anchored the first regional malls, leading the way for rivals like JCPenney, Macy's, McRae's and Dillard's, all of which would also eventually anchor the rapidly expanding number of suburban shopping malls. And, to further solidify its domination of this niche, Sears vertically integrated and began to develop its own private brands (such as DieHard batteries, Kenmore appliances and Craftsmen Tools) and localize distribution, long before those concepts entered general practice.

This is the juncture, late in Wave I, when Sears began surging past its primary competitor, Montgomery Ward, which refused to enter the malls, considering them too costly. This would prove to be a fatal misstep and the beginning of Ward's long slide downward.

Sears' proactive response to the changing world around it allowed a long and powerful rise. By the early 1970s, it was one of the eight largest corporations, and one of the most powerful brands, in the world, with revenue surpassing that of the next four retailers combined. Indeed, it was more dominant, and had greater momentum, than Walmart does today.


The Downward Slide

But ultimately, like Montgomery Ward, Sears failed to see, understand and respond to the changing economic, consumer and competitive environments outside its own four walls. Sears took a great risk and reinvented its business model, but failed to strengthen it.

Ironically, latecomer JCPenney did evolve its business model, essentially adopting Sears' strategic advantages, such as private branding and distribution.

Sears and Montgomery Ward represent just two of many retailers whose business models and consumer value propositions were innovative and relevant to the consumer and economic environment at the time of their inception. They also evolved their competitive advantages, growing to occupy relatively dominant positions in the marketplace. However, they would ultimately represent the many chains that, after achieving such success, failed, for myriad reasons, to continue adjusting to the ever- changing economic and consumer conditions around them.


Wave I Key Market Characteristics

Production/Retail Driven: Pricing power resided with manufacturers and retailers due to a dearth of competitors, a minimum and uneven level of products and services and a fragmented or nonexistent distribution infrastructure. Therefore, consumers had to accept what was available to them.

Production Chasing Demand: Producers and distributors, including retailers, were all growing and expanding to chase and capture business from shifting consumer markets. With some exceptions, notably in the larger cities, supply would continue to underserve demand, primarily due to the growth of the population, including immigrants, and the migration of the citizenry from east to west and north to south, and from rural areas to small towns and cities, all challenging an embryonic, fragmented and inefficient distribution infrastructure.

Single-Product Specific Brands versus Cross-Category Brands: Lack of cohesive marketing and communications infrastructure, as well as a scarcity of producers, resulted in both a limited availability of brands and their confinement to single-product categories.

Fragmented, Isolated Markets: Geographically dispersed, largely rural and small-town markets, many isolated and unconnected by transportation and/or communications; therefore the distribution of goods and services, including to retailers, was at best slow, random and inefficient.

Fragmented Marketing: Due to the dispersed and isolated market structure, and the lack of a national communications and media infrastructure, advertising and marketing of any type were sporadic, local, infrequent and inefficient.


Dominant Retail Models

• Freestanding department stores in cities ("palaces of consumption"), expanding later in Wave I to anchor the emerging shopping malls

• The Sears and Montgomery Ward mail-order catalogs (as responsive distribution to rural and small towns), which eventually led to their opening stores in small towns in the early 1920s

• Sears constructed and anchored the first malls, to be followed by department stores and JCPenney (founded in 1902) as additional anchors as they all raced toward Wave II and the mid-twentieth century

CHAPTER 2

WAVE II

DEMAND CREATION IN A MARKETING-DRIVEN ECONOMY


Capitalism Unbound

There was explosive growth across all industries in the United States post–World War II and through the late 1970s, including retailing and all other consumer-facing industries, encouraged by the massive building of the nation's communications, transportation, distribution and marketing infrastructures.

By most accounts the war was the final and key factor in pulling the economy out of the Great Depression, thanks to the sheer magnitude of the effort in gearing up for global battle, both in dollars and manpower. Essentially, this effort reflated the economy. By 1945, the United States represented about 45 percent of worldwide GDP, way up from its historic norm of 25 to 28 percent. (Sadly, of course, this was also heightened by the economic devastation of much of the rest of the world.)


(Continues...)

Excerpted from The New Rules of Retail by Robin Lewis Michael Dart. Copyright © 2014 Robin Lewis and Michael Dart. Excerpted by permission of Palgrave Macmillan.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Meet the Author

Robin Lewis is the founder and CEO of The Robin Report. He launched the Goldman Sachs retail consulting network, Vantage Marketplace, prior to which he was executive editor of Women's Wear Daily. He is often quoted in Time magazine, Chicago Sun Times, Financial Times, The New York Times, The Wall Street Journal, Brand Week, and Advertising Age, as well as appearing on CNBC, Fox News, and Good Morning America.

Michael Dart is a private equity partner, specializing in retail and consumer goods, with global management consulting firm, A.T. Kearney. With over 20 years of experience, he has worked with many of the largest private equity funds and global retailers. In 2010, he was recognized by Consulting magazine as one of its Top 25 Consultants. Michael is a frequent speaker at major retail conferences around the world and a frequent contributor in the press. He was recently profiled in the Personal Journal section of The Wall Street Journal.

Customer Reviews

Average Review:

Write a Review

and post it to your social network

     

Most Helpful Customer Reviews

See all customer reviews >