Beauty Store Business

MAY 2015

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Marc Birenbaum Executive Editor 4 May 2015 | Editor's Note "Based on our extensive research, there is an urgent need for rethinking the stores …" Will Your Beauty Store Survive? I HIGHLY RECOMMEND THAT YOU READ the new book Retail Revolution: Will Your Brick-and-Mortar Store Survive? by Harvard Business School faculty members Rajiv Lal and José Alvarez and former HBS research associate Dan Greenberg. They explore the strategic options available to brick-and-mortar retailers in today's age of ecommerce. "Based on our extensive research," says professor Lal, "there is an urgent need for rethinking the stores and taking immediate action—without which many chains will quickly enter zombie territory." In their book, the co-authors present bold predictions for the future of retail, including: the end of the one-stop shop; increasing levels of price transparency, coupled with a flattening of overall prices; and hard times for one-size-fits-all retailers. The book also explores the future of ecommerce: Whether Amazon or Walmart becomes the central online player will determine the future of retail. If Amazon wins, the focus of retail will be on convenience. Shoppers will rarely leave their homes, and so much volume will be sucked out of brick-and-mortar stores that large numbers of retail operations— including supermarkets—will no longer be able to support their store base to the detriment of low-income consumers. In a price-focused Walmart future, Walmart will use supermarkets and dol- lar stores as ecommerce pickup points. Retailers can then cluster around these collection points to benefit from cross- traffic when customers arrive to pick up groceries and ecommerce orders. (Should we all then root for Walmart over Amazon?) In addition, the co-authors identify three challenges ecommerce poses for brick-and-mortar retailers: • Fundamental shifts in core categories to digital content and distribution • Clear advantages in cost, inventory and selection on the part of online retail • For retailers mostly protected from the threats described in the first two challenges: the need to find ways to build more store defenses and leverage online activities to drive more traffic to brick-and-mortar operations Depending on which threat or threats a brick-and-mortar retailer faces and the unique advantages it may possess relative to online retailers, brick-and-mortar stores have three possible solutions: • They can "wind down" in a process that continuously rationalizes the organiza- tion and its store base to maximize the generation of cash. • Or they can "shrink and transform the box" to cut the costs of overly large stores and focus on the unique values that the store can deliver to customers and brands. • A third solution is to "enhance the value of the box" by providing in-store services and education, merchandising private- label products, bundling products for use in do-it-yourself projects, and using online tools to direct traffic to the more experiential brick-and-mortar channel. Finally, they note that the first two of these solutions involve processes that they see as having dire consequences for the U.S. economy. ■

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