The New York Times has a story about how "the retail industry is trying to figure out its correct size.
"Retailers, faced with sky-high demand from shoppers during the pandemic, spent the past three years ramping up their operations in areas like human resources, finance and technology. Now, times have changed.
"A public that rushed to buy all sorts of goods in the earlier parts of the pandemic is now spending less on merchandise like furniture and clothing. E-commerce, which boomed during lockdowns, has fallen from those heights. And with consumers worried about inflation in the prices of day-to-day necessities like food, companies are playing defense."
The Times writes that "while it’s not unusual for major retailers to announce store closings and some job cuts after the blitz of the holiday season, the recent spate of layoffs is more about structural changes as the industry recalibrates itself after the rapid growth from pandemic-fueled shopping. And it accompanies broader worries about the state of the U.S. economy and layoffs by prominent tech companies."
Not all retailers, the Times writes, "are in a defensive crouch. For instance, Walmart announced this week that it was raising the minimum wage for its store employees in a bid to attract and retain workers in a tight labor market.
"Still, some retailers are becoming focused less on bringing in new customers — an expensive undertaking — and more on retaining those they gained during the pandemic."
- KC's View:
The notion that it is cheaper to keep existing customers than to bring in new customers is one that has existed pretty much since retail was invented … so it is kind of ironic that it took a pandemic to teach some retailers that lesson.
I've always thought that retailers gravitate toward customer-acquisition strategies because such efforts often can be outsourced to an ad agency or PR firm … while satisfying existing customers is very much an in-house operation. It requires consistent innovation within the store (or, these days, online), and that's hard.
What's happening right now in retail - and in so many tech firms - shouldn't really be a surprise. So much growth took place during the pandemic, as companies sought to satisfy customers in a fast-changing climate that was hard to predict, that some sort of rightsizing probably was inevitable.
Retailers just have to avoid making knee-jerk decisions. This is a continuum, and while some retrenchment may be necessary, this also is a time for innovation, for carving out competitive niches that will give them a sustainable differential advantage.
Being "defensive" is short-sighted. It misses the moment, and grants opportunity to those with larger visions.