Forget the algorithms, the customer is still king

The other night, my wife and I were watching a documentary on Harry Gordon Selfridge.

He was born into a working class family in Ripon, Wisconsin, in 1858. His father went to fight for the Union during the Civil War but, after being honorably discharged, never came home. That left his mother to raise three boys on her own. Harry’s two younger brothers died just after the war.

Harry left school when he was 14 and got a job at a bank in Michigan, where they were living at the time. Then he ended up at Marshall Fields in Chicago, the swankiest department store in the Midwest.

There, Selfridge learned all about retail and began to make a substantial contribution to retail shopping in department stores.

20^th Century game changer

His biggest claim to fame came when he decided to move to London and open his own grand department store, Selfridge’s. This was a disruptive event and cultural shock for the British.

Never before had working class people and upper class people shopped together. He put the makeup and fragrance counters at the front of the store, inside the main doors. He brought ready-to-wear clothes to consumers for the first time.

The man was an innovator.

And as the narrator continued through the list of all he pioneered — bargain basements, semi-annual sales, women’s bathrooms, display windows — I turned to my wife and I said, “You see, retail isn’t about algorithms and modeling. It’s about how you treat your customers.”

The innovations he made a century ago are still with us today. And Selfridge didn’t get an MBA in retail merchandising from Yale. He learned it intuitively and applied it. Even with all of today’s software-driven customer research management, apps and everything else, his ideas are still a vital part of our retail experience.

This analog part of the retail experience has been in rapid decline in recent years as we see with airlines, legacy retailers and others.

Amazon’s magic

It’s not just that Jeff Bezos’ Amazon gives you variety, but for a small extra fee you get two-day or better delivery keeping your instant gratification alive. Bezos’ genius is actually using technology to make the analog “buy” decision an easy bridge to cross.

I feel I have a relationship with the retailer.

Dinosaurs like Sears, Ralph Lauren, JC Penney, Macy’s, etc. have not kept up with the customization that technology affords us to interact with them.

I buy a book and Amazon tells me what others who bought the book like as well. It’s certainly cheaper to just sell me a book than to build a relational database to provide me with that information.

But it’s not about the single purchase. It’s about the next purchase.

And the fact is, Amazon isn’t completely to blame for the department store and clothing store demise. I read an interview with a buyer for Macy’s who said that it was more a price issue — they can’t sell the clothes for the prices others can.

You can’t stop innovation

They lost their interest in innovating and just stuck to bean counting. They assumed their market size would keep them safe, even if they weren’t the newest or coolest kid on the block.

Now there are mail-order clothing companies where you answer a bunch of questions about your personal style and they send you a couple of new outfits a month. You keep what you like and send the rest back.

It’s the model Warby Parker used to disrupt the eyeglass industry.

My point is, in this technological world, it’s still the companies that treat us as human that thrive. Subconsciously or not, we look for connections. And technology can either help make them or hinder them.

I saw where Sears’ CEO said he’s not in denial over the dire straits his company is in. I see the Kmart in my city announce that it’s closing after 30 years. I saw the ghost towns the Sears and JC Penney stores at the mall became.

I saw businesses that no longer cared about their customers, that weren’t prepared to meet the new demands of the retail space. McDonald’s was finally shaken from its torpor; it will be interesting to see if it can make the transition before Panera eats its lunch.

The next winners

While I bemoan the loss of these icons of yesteryear, I also see firms that are replacing them. The big retailers have slashed their clothing orders, which allows discounters like TJ Maxx and Ross to buy better quality at better prices.

And given the prices, no one expects these stores to be upscale experiences. You buy your basics here and then use the fancy mail-order companies for your nice stuff.

My thinking is the U.S. economy is not out of the woods yet, and even with the unemployment rate as low as it is, these aren’t good, solid, middle class jobs. They’re service industry jobs to pay rent and eke by, not thrive.

That means as the big old American stores wither, the new trend will continue — TJ Maxx, Ross, eBay, Amazon, The Dollar Store, Dollar General are feeding the demands of the consumer now.

Tech is all well and good, but giving people what they want at the right price is what it will always be about.

— GS Early

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