Retail's Timid Transformation Trap

As I’ve been saying for awhile now: Shift happens. It’s just happening faster and faster all the time. And nowhere is that more apparent than in the retail industry.

Despite the seismic shifts that have unfolded during the past two decades, despite the nearly complete resetting of the competitive playing field, despite a radical redefinition of the relationship between buyers and sellers, far too many brands have been sleepwalking through this revolution.

Rather than boldly addressing these emerging dynamics, many have engaged in an endless series of largely incremental changes that, at best, doom them to pernicious irrelevance or, at worst, accelerate their path to eventual extinction.

It’s Just a Flesh Wound

Sadly, we are all too familiar with once powerful brands that seemed to have developed a core competence in denial. Bed, Bath & Beyond, Blockbuster, Borders, Circuit City, RadioShack, and, most notably, Sears, once the most valuable retailer on the planet—and where I began my retail career—are all gone. Other former market leaders, like Toys R Us, are mere shells of their previously dominant selves.

In particular, it’s depressingly easy to shine our critical light on the department store sector, which has been hemorrhaging market share for more than twenty years and has done little of any consequence to stem the tide. Faced with year after year of lackluster performance and massive migration of market share to various competitors, Macy’s, Kohl’s, Dillards, JC Penney, et al, have all acted as if delivering a slightly better version of what they’ve always done would be their salvation. As half measures have largely availed them nothing, they’ve been left to try to store close and cost cut their way to prosperity.

The Curse of the Timid Retail Transformation

While it’s common to blame department stores’ woes on the rise of e-commerce in general, and on Amazon?in particular, this pithy analysis ignores the fact that nothing prevents department stores’ from having a robust online presence (and many indeed do) and that the sector’s precipitous decline began well before Amazon offered much in the way of directly competitive merchandise.

The truth is much of the share loss is the result of consumers preferring to shop in physical stores that have a more focused product assortment, have locations that are far more easily accessed, and that deliver a stronger price-value relationship.

This is particularly obvious in the ascent of off-price chains like TJX and Ross Stores. TJX, the parent company of T.J. Maxx, Marshalls, Homegoods, and several other formats, has gone from being a niche player to revenues more than double Macy’s, the leading US chain. Moreover, the T.J. Maxx banner will soon have more than three locations for every Macy’s.

?Perhaps the saddest example of legacy brands sitting back and watching can be seen with the rise of Ulta Beauty. At the turn of the century the “off-the-mall” cosmetics concept was a regional player operating in a handful of cities. Today it boasts over 1,400 locations. But what most underscores how poorly department stores have responded is that despite selling products that represent only about 10% of a typical department store’s balance of sale, Ulta’s market capitalization is roughly the same as the top four departments stores?combined.

It turns out the price for timidity can be quite high.

Mind the Gap

I start out my new book?Leaders Leap: Transforming Your Company at the Speed of Disruption ?discussing what I call the “transformation gap.” This gap emerges when organizations fail to aim high enough in the value they deliver to customers and the distance that is created between their offering and the competition’s. This gap becomes even wider when organizations fail to innovate quickly enough.

Too many retailers can be described as slow, afraid, and clinging to the past. Their timidity—their failure to let go of a broken business model—in a world that is changing more profoundly and ever faster may well create a chasm that is to wide to cross.

Working to deliver the proverbial “faster horse” may seem like an eminently sensible, low risk strategy. But when circumstances demand something radically different, failure to aim higher, move faster, and act more boldly, turns out to be?the riskiest strategy of all .

As I observe the many retail organizations that struggle to transform for a modern age, I’m frequently reminded of the line from Hemingway’s?The Sun Also Rises?when one character asks another: “How did you go bankrupt?”

He responds: “Gradually, then suddenly.”

This post is a version of an article that originally appeared on Forbes , where I am a senior retail contributor, as well as on my blog at stevenpdennis.com.