November retail sales have been scary for most retailers. Working with a range of retailers, who are doing business from Great, to Terrible, I thought it might help to consider some common actions and strategies that the winners are using.

Winners

Winning Retailers focus on much more than the customer.

I know that received wisdom is that winners focus on the customer, but that worked when the retail tide was high, now the tide is going out.

Warren Buffet said that

"It is only when the tide goes out, that we see who has been swimming naked"

I think we may be seeing a lot of naked retailers in the coming months, so.. grab a towel or a bathing suit now.

Winning retailers are FAST. They know that the knowledge that they have of customers is only the beginning, they understand that winning at retail means much more in turbulent times.

Successful retailers understand that they need a grasp of far more than just customers. They want a grasp of:

Customers
Browsing non buyers
Low Brand Users
Competitor's Customers
Targeted New Customers
Social Groups and Family
Social Networks and Rating sites

Now, with a grasp of the wider market and POTENTIAL market, they want even more…

Timeliness
Trend Analysis
Market Dynamics

Wal-Mart is winning because they have a much better idea of who the customer and the market is, and they are mastering timeliness and Trending.. (they know where the markets, trends and consumers are going, long before you do.

That is why they are winning

Let's take a closer look at that.

Wal-Mart Stumbled badly in the last two to three years. Wal-Mart realized that they needed a better strategy to understand and get ahead of the market

Wal-Mart has built the most effective tool for understanding the marketplace and their place in it.

So, tool number one. Wal-Mart measures the "flow" of customer and consumer spending. What does that do?

Wal-Mart know long before you did, that the consumer, which includes all of the extended groups I have mentioned, was experiencing increasing financial stress.

By measuring "Flow" Wal-Mart saw far earlier, what others missed.

Consumer spending was increasing closer to the normal pay period for most workers, and decreasing near the end of the pay check cycle.

Wal-Mart calls it "stress'

Stress has been increasing for quite a while now…

Wal-Mart analyzed the nervous system they had build talking to the extended groups that they have engaged, and they identified clear stresses, and trending for a changing mood shift on the part of customers and consumers. The economic STRESS would trigger changing psychology of shoppers and that would set up a major trend shift and new market dynamics.

So Wal-Mart ANTICIPATED the market and the consumer, and they took action ahead of every other retailer out there, and they are reaping the rewards.

Wal-Mart realized they needed to target a wider group of "core" items and get really aggressive on pricing and pricing perception in the marketplace and mind space of the consumer.

Wal-Mart used their new "nervous system" to get the new message propagating into the marketplace and the mind space of the consumer, think of it as "react" from intelligence and then "propagate" intelligent response into the marketplace.

Winners have a better grasp of Customers and the entire market, they also have tools to influence and reach out to them.

What about LOSERS?

Let us take a look at a recent set of articles on SEARS

http://www.google.com/hostednews/ap/article/ALeqM5imTOVIR8LCwd1qFDdcoVToPkd4UgD94QNTO00

http://news.google.com/news/url?sa=t&ct=us/9-0&fp=49381eb0070dbe74&ei=LEA4Sc-iE47SgwP84dGMDw&url=http%3A//www.marketwatch.com/news/story/sears-stumbles-good-times-bad/story.aspx%3Fguid%3D%257BB7BB384F-9DB9-4FBB-9C87-6CEC995BC677%257D%26dist%3Dmsr_1&cid=1276835763&usg=AFQjCNGdT75UHPkoDBzNGDp-faNpXW4RcA

Sears does not understand the market, the customer or any of the other dynamics and they are struggling.

Let's take some pithy accurate quotes:

"But for Sears, the problems go much deeper. Even in good times the company has had trouble standing out from its rivals.

Sears essentially gave up on pleasing its customers awhile ago. Early on, it was considered more of a real-estate play -- or even a quasi-hedge-fund vehicle for Chairman Eddie Lampert -- than a retailer. It slashed marketing and store spending while raising prices. Rundown stores, disappointing inventory and higher prices chased business away and got people out of the habit of shopping there."

"The deck is stacked against Sears. And its challenges go deeper than a weak economy."

http://seekingalpha.com/article/108881-sears-holdings-squandered-opportunity

"Sears continues to operate as a sub-par retailer and uses excess cash flow to repurchase stock. As the economy has faltered, so has cash flow. Adjusted EBITDA year-to-date has fallen to $700 million, from $1.5 billion last year. The only positive has been the reduction in share count. Sears earned $1.5 billion in 2006, or $9.58 per share. If it somehow is able to earn that much again when the retail environment improves, earnings per share would be nearly $12 per share because of the lower share count. With the stock at $31 today, you can see that the stock would trade back above $100 in that scenario.

But how will that happen anytime soon if Sears continues as it has? It won't, which is why Peridot Capital has been steadily selling Sears stock over the last year. It used to be a very large holding, but is now one of our smallest. Eddie Lampert evidently was convinced he could do more with the retailer's operations even after the low hanging fruit had been picked. That was a bad decision."

"To me, Sears is in the same exact position as General Motors (GM) right now. It is operationally inferior to its competitors, but refuses to dramatically alter its business plans to adapt to the market. Yesterday the Big 3 CEOs testified in front of Congress, explaining that the economy is the source of their problems. They need annual auto sales of 13 million units to earn a profit, far from the 10 to 11 million run rate we are now facing."

"I don't need to tell you that GM's business model is the problem, not the economy. If the U.S. auto market shrinks due to higher job losses and tighter credit standards, managers need to make changes to ensure they can survive in such an environment. In that case, a stronger economy would mean higher profits, not just survival."

"The bottom line is, if your company adapts you will likely be a survivor. When times are bad the weak die out and the strong not only survive, but they come out of the downturn even stronger than they were before. In today's market, when nearly every stock is down tremendously, there are fewer reasons to invest in Sears or GM when you can buy a stronger company like Target or Toyota (TM) on sale. When Target fetched a 20 P/E I preferred to buy the more undervalued Sears. Combine disappointing execution by Sears and a 50% drop in Target stock, and given the same choice I will take Target at a 10 P/E, which is what I plan to do."

So, I will finish by suggesting that you Mr. Retailer re think how you know and plan to grow far more than your immediate customer base.

Be a WINNER and get ahead of the curve, retail has been far too reactive for far too long.

Now you need to get proactive if you want to survive.

If you are still in business in 2009, we can continue these conversations.

Merry Christmas.

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Martin Hoffmitz
VP, Client Partnering
BehaviorWorx Inc.
#202 - 222 Islington Avenue
Toronto, ON M8V 3W7

Email: martin.hoffmitz@bwxi.com

Office: 416.251.0111 x250

Cell: 647.287.4491
Fax: 416.251.9489
Web: www.bwxi.com
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