I regret to inform you that you have been diagnosed with short-termism

But for some retailers, on the plus side, there is a cure — if you are willing to take the pain, and learn the lessons that Formula 1 can teach you

I have spent a really, really, quite really a long time working in retail. If you had told me this when I was sixteen, I would have laughed at you, and asked you if you were sneaking liquor from your parents’ drinks cabinet again. I did a Politics degree at university. Plus, I really did not like hanging out at the mall — regardless of what John Hughes films, a seemingly million ABC Afterschool Specials, and many television shows seemed to show as the epoch of my teenage years. Shopping wasn’t my thing. Malls weren’t my thing. Retail was not my thing.

But I slowly moved away from Politics (I like to get things done. Working in Washington DC in politics is the antithesis of getting things done. At least, productive things, ones that will make a difference.) I slowly moved into direct marketing , (stay with me, those younger than 30, who don’t recall the clogged postboxes, and the excitement of the Sears Wish Book arriving every autumn so you could mark down what you wanted from Santa), and then by having my own direct and digital marketing agency, I got into retail. Behold.

I’d had Saturday jobs in retail when in school, but those don't really count. You do that for pocket money, not to learn — although I did learn lots, I realised later. For the sake of brevity, we'll skip the rest of my career, and if you have a flaming interest in the path I took, thanks to LinkedIn, you can see it here. And during my journey, it turned out I loved retail. Not just the selling bit. The what made customers tick bit. The why navy sells more than khaki bit. The subtle changes you can make on site UX and watch results begin to almost instantaneously flow through your analytics. Supply chain, marketing, merchandising, customer service, and every other bit, especially technology. I am a fully signed up, 360-degree member of the retail geek club.

As it is a Friday, you may be a bit bored, and looked at my profile, and realised I have worked for MANY retail organisations, both great and small, and everywhere in between, including one I owned myself, which was a ‘bricks & clicks’ business. Having worked in so many retailers, I have come to an incredibly frustrating, and sad, solution. While I am not a doctor, and can only boast a MSc, I know enough to diagnose retail with the horrible disease of short-termism.

It may not sound so bad at first (after all, if it is short-term, so it will be gone soon, right?), and you may think your retail organisation doesn’t suffer from it. But ask yourself these questions:

• Do you find yourself having the same trade meeting year after year — and that trade meeting mirrors the same one you had in week 44 last year?
• Does your business overly focus on the weekly results, the monthly results, the anything results against budget, why the footfall had a blip (quick, check last year’s weather — was there a blizzard?) and begin to flap around like an injured bird when you are slightly off and about to miss budget, and massive emails fly around about ‘we really need to PUSH’ this weekend, or ‘How about if we put a bubble machine outside the x store to attract attention?’ (If you are not selling bubbles, this is not a sure-fire strategy, although it will certainly attract some attention, but the kind that opens their wallets? Hmmm.)
• Does your MD/CEO suddenly begin showing up at operational (ie-internal) board meetings again AND — a clear sign of worry — not read their iPhone the whole time, and begin to tell you all what you are clearly doing wrong? Revisiting ghosts of seasons past, as opposed to discussing the (usually non-existent) longer-term strategy, and are parts of that causing a ruffle, and was it expected — part of the pain to get away from short-termism — or is part of the longer plan causing an unforeseen circumstance?
• Is your business reactive rather than proactive? (Example: do you make trade decisions based on making budget…such as quiet discounting, or a % off a category which you sneak into an email)
• Is your social media team asked to find ways to get more footfall into store so the monthly numbers will look better in a board pack?
• Are you as a business re-forecasting more than once a year after you set the budget for the financial trading year?
• Do people become less collaborative, and more finger pointing goes on?
• Essentially, do knee-jerk decisions take precedence over long-term ones? And does anyone even know what the ‘long-term strategy’ is? (Ideally 36 months, but if you have 24 months, that is great….!) Not just the board, or the directors, but the whole business. Top to bottom?
• And, finally, is the customer ever the focus of the decision making? As in what they need, where they want / need it, what their feedback is, how they fit into the long term plan. As in recognising the customer as being more than a cash-cow. It is amazing how low on the totem pole of planning customers come in the overall business plan.

If you answered ‘yes’ to any of the above, I am afraid we must diagnose you with short-termism (and I really had to restrain myself. There could have been at least 12 more points…)

And short-termism works for awhile. Which is why it is dangerous. A business can get good returns and happy customers (and shareholders), because they are in the zone where their product is right for the what the customer and the zeitgeist of the times are dictating. The problem is when you fall out of the zeitgeist, or start expanding rapidly — either in product range, gender range (adding men, or children, for example), geographically, or over sell into wholesale which takes the luster off the ‘cool factor’ of a brand — if you make something too available, it inverts on itself—no one wants it if everyone else has it. (Paging Michael Kors and his ubiquitous bags here…). Or licensing, and suddenly you have a brand making dishes, wallpaper, paint….

But retail moves fast, and boards want quick wins. They can be delivered, and quick wins should be part of any retailers strategy — something has to pay for today. However, to be consistent in them, they need to be part of a larger, well-planned strategy that the right people are part of the development of, and that everyone is bought into, and everyone has a part in.

Here is a great example of the above, albeit from outside retail. Take the Mercedes AMG Petronas F1 team. Anyone who knows even a little about me knows I am a huge F1 fan. Crazy huge. Enough so that I plan to become a F1 driver in my next life. Last year Mercedes ate up every track they raced on. Lewis Hamilton [2x world champion] (who I adore, please no bad Lewis comments, it is Friday, I am weak) and Nico Rosberg were pretty much always on pole and almost always a P1 or P2 finish. They won 16 out of 19 races. Mercedes were dominant. They won the constructors championship so early, the other teams essentially folded up their dreams of that and went home mentally on winning that by the 3rd race.

Last year, in pre-season testing, Ferrari was the fastest on single lap times. Everyone thought they would be a contender. They weren't even close. They were so bad, they had to release Fernando Alonso from his contract early. Managment left / was fired. Their short-term results suggested they would be great, but they hadn't built a car for the long-term — races that could be 60, 70+ laps. They failed, and big time. (And, perhaps as a result, Ferrari retail stores were closing all over Europe.)

Meanwhile, Mercedes built a car that was a complete change from any car they built before. When they signed Lewis Hamilton, and when they suffered through the 2013 season (they expected 2013 to be ugly, it was in the plan) they were all keeping their powder dry, because they knew what their long-term strategy was, what they were building to, and what that 2014 car was going to deliver. And did it ever deliver.

Earlier this month was the first pre-season testing for F1 of 2015, held over 4 days at Jerez in Spain. Once again, just like last year, Ferrari delivered the single fastest lap time. They did it over several days, as in 2014. I won’t get technical, but the speed traps at Jerez showed that Mercedes did have a signifcant speed advantage over Ferrari, they just weren’t going all out yet. They were also driving with full tanks of petrol. They wanted to see the long-term possibilites. They weren’t at Jerez to show off for their sponsors for the short-term. They are — as a conscious collective — all about the long-term.

Collectively, Hamilton and Rosberg “racked up a staggering 516 laps” (as the F1 site reported) in testing for Mercedes. No other team broke 400. They delivered more than 116 laps than all the other teams on the grid.

As Toto Wolff, Executive Director of Mercedes Benz Motorsport put it and the end of Jerez: “The times have no significance, but the distance does.”

So retailers, any good retail (and by this I mean any channel — store, ecommerce, call centre, anywhere a customer can purchase from) operation has a plan that allows for more than short-termism. Build for the long-term, and you have the ability to box out the rest of the field, just as Mercedes has.

So, for Friday, I'll leave you with this to ponder. My other favourite retail analogy I use is that retail is like the Afghan conflict. We — all the coalition partners — went in thinking this was a short-term mission. There were a great many people who said this was a fallacy, and we were setting the whole mission up for failure. I am sure there are plenty of books you can read on this. My point is, we did approach it as a short-term mission. We entered Afghanistan in 2001, either really believing it would be a quick in and out scenario, or more likely, knowing it would be hugely unpopular to tell people that this was going to be a long-term effort — thirteen years. If we had planned for thirteen years, it would have looked quite different. The strategy would have been different. The requirements for manpower, equipment, coalition members, etc would have been different. We would have engaged with the Afghani’s differently. But we didn’t. Instead, we fought thirteen one-year wars. And look at how well that has turned out.

So, on a Friday afternoon, retailers, take a good hard look, and ask yourself, do you want to resemble the Afghanistan conflict (failure), or do you want to resemble Mercedes Benz racing (success). It is clear which path each took to get to where they are.

What will be your path?

Kristine is an Anglo-American, Brooklynite by birth, British citizen by choice. She is really quite simple. Wants: wine, whisky, 30 hour day, lots of sleep. Ecomm/retail geek. Sports mad. Wants to be in Cornwall, and in her next career, an F1 driver (or will happily retrain to be a F1 driver) or Serena Williams.