Sadove, principal of Stephen Sadove & Associates, said Walmart has “brilliantly” shifted its approach, buying Jet.com, bringing its founder Marc Lore to build a bricks-and-clicks ethos.
Sadove’s comments came during a wide-ranging discussion with Shyam Gidumal, leader of EY’s consumer products and retail market segment.
Gidumal set the tone by pointing to the changes in the way people live — from how they eat and stay healthy to how they use technology and shop — and noted that the pace of that change is only accelerating.
He said there was “a new distinction in the marketplace between what people do in terms of buying versus the way they approach shopping — buying being a disconnected approach to acquiring products as distinct to the experiential type of approach.”
That has import implications for just how merchants should mix online and physical retail.
“When you look around you have this convergence,” Gidumal said. “You’re starting to see some green shoots. You’re starting to see people come up and say, ‘We’re going to do things differently.’”
But different isn’t necessarily easy in retail — and Sadove knows it.
“I spent 10 years at Saks asking, how do you change the culture?” Sadove said, noting that he started his career in the consumer world before moving to retail. Along the way he heard that, “A culture change trumps strategy every time.”
“You have 20 percent of the people who really embrace change and the direction you want to go,” Sadove said. “And you probably have 20 percent who are active resisters and the 60 percent is sitting on the bench waiting to see which way the wind is going to blow. You have to win the hearts of the people.”
Change also takes a lot of work.
“At Saks, we had a lot of bad ideas before we created a shoe floor so big it had its own zip code,” he said.
It is especially important now that retailers get their heads around change because the shoppers are clearly in the driver’s seat.
“This is all about the consumer,” Sadove said. “It used to be the power was in the hands of the retailer. Today, it’s all the consumer.”
And consumers today want not just bricks-and-clicks, but also brands.
“Consumers came out of the recession actually valuing brands more,” Sadove said.
However, brands have also become retailers now, complicating an already difficult path forward for department stores.
“J.C. Penney, Macy’s, Kohl’s, they’re all trying to increase their percentage of private brands,” Sadove said. “They want to control their own destiny, but they still need the brands because the brands bring the credibility and a consumer base.”
And one of the big questions facing retailers in the immediate future is just how willingly consumers will open their wallets. The more they spend, the more cushion stores will have to reinvent.
Despite some conflicting readings of spending from the government and private data, Sadove said, “The reality is the consumer is pretty healthy.”
He said excluding automobiles and gasoline, spending was up close to 5 percent for the holiday season — a growth rate the sector hasn’t seen in recent years. But the pace of growth has slowed coming into this year.
“The implication is that as we’re coming into 2019, inventories are probably in pretty good shape, the consumer’s still shopping, but things are getting tougher and tougher [and that] means there’s going to be more pressure,” said Sadove, noting that pressure would be felt on supply chains and from competitors.
That will force retailers to differentiate to win — bringing even more change to an already radically altered market.