Q&A: A Deep Dive into the “Retail Meltdown”

Recently, we dove into the phenomenon that’s been dubbed “The Retail Meltdown.” It wasn’t so much a tongue lashing as it was us trying to peel back the layers of an onion, trying to figure out what’s going on with brick and mortar retail — and we were left just as teary-eyed as if we actually were peeling onions …

Of course, we’re not the only ones who’ve done some thinking on why retail is having this gigantic moment right now. Analysts, other publications, Wall Street, you the retailer — we’re all trying to understand what’s happening in the marketplace, why consumers shopping habits are changing, and how retailers can adapt to either stave off failure or actually start to turn this thing around.

Enter Handshake and its Chief Marketing Officer Mike Elmgreen. The B2B commerce platform has a unique position in the retail industry, serving as the go-between for manufacturers and distributors and (in most cases) their retail partners. From services to training, Handshake has a great deal of firsthand knowledge about what retailers are doing right and where certain opportunities present themselves.

We sat down with Elmgreen to talk about this “Retail Meltdown” and to get his thoughts on what retailers can do to better position themselves in the market.

Dealerscope: Tell us a little bit about Handshake and the services you provide.

Elmgreen: We are a B2B commerce platform, and our customers are manufacturers and distributors who primarily selling to retail locations. We help power the ordering that happens between those manufacturers and distributors, their physical product, and the stores that ultimately stock those products and then sell them on to the consumer. We provide apps for the sales reps who are out on the road visiting those stores and selling the product for that manufacturer or distributor, and our apps enable them to prepare better for customer meetings, write orders really easily, get that transaction done, and just make it a more digital and seamless experience for the retail buyer. And then we also offer a bunch of B2B ecommerce solutions, both mobile and web, that allow a retail buyer who's in the stock room, who's run out of certain products, to just be able to quickly order those from a mobile device or from a laptop, and just have an Amazon-like experience for their B2B purchasing.

We really help sort of power those orders that happen one step back from the part of the supply chain that we typically invest in as consumers. So we're powering the B2B ordering between those parties.

So you saw our report on the current state of retail. In your words, what's going on with this industry right now?

Look, I think it's—obviously it's the result of a couple of a number of different factors. Though, I think really retail has had to kind of reimagine itself in the sense of if they started it today. You can't ignore kind of what's happening out there, and they have to find ways to basically try and leverage the best of online connected commerce, but also to harness the human elements that enable them to differentiate from an online retailer through the vehicle that is their store.

What are some things that retailers can do to differentiate themselves?

I think there's a couple of things that they can potentially do to make that happen. One is they have to find ways to basically bring service to the fore. So, how can a retailer that has such a strong brick and mortar presence bring personal service and recommendations—kind of that concierge-like customer experience—to a store? How can they add other kinds of value-added services or offerings around the purchasing that's happening in stores? So, I think about Apple's learning centers that they provide; I think about when you go into a footwear store and you're looking for some runners and they've got that run analyzer where they … make a recommendation about shoes that are going to be the best fit for you. You can really only have that kind of experience when you're there in person talking to the store associate and you're physically present in the store.

And then just, like, other ways to differentiate through other types of experiential marketing, and activation in-store. What can you do to add value to the consumer by encouraging them to come in store? Maybe they get some sort of additional giveaway, maybe they get some sort of loyalty bonus, or if there's some sort of experience that you can offer them that, again, they can only get by visiting the store.

Is this meltdown a phase? Do you see it ever turning around?

I think we're likely to continue to see more bankruptcies throughout the year. I think that the onward march of ecommerce and mobile commerce is just representative of a shift in consumer buying habits and preferences towards online models that are much more on demand. And so, I don't think it's the end of it yet. I think what we are seeing is not so much an aggregate downturn in retail activity, but we're seeing a major shift in the mix of that activity from brick and mortar sales channels to purely online models or hybrid models that combine in-person and online.

I don't think that it's over yet. There's a lot of distressed debt out there as a result of private equity leveraged buyouts of retailers. You've seen that, one example of that, a casualty of that kind of effect was RadioShack going into Chapter 11 for the second time.

When we see the brands mentioned in the "Retail Meltdown" it's a lot of big chains. Are the little guys in better position to avoid the impact of the meltdown? Are they protected from this?

I don't know that they're entirely protected. But they do have some opportunities to weather the storms that larger players may not have. So, for instance, a smaller player has the opportunity to offer added value through localized offerings to the community that they serve. Being able to adjust their marketing specifically to the preferences of customers that are very, very close to them is something that they can do very quickly and easily. I think that they also benefit from having kind of more knowledge of the target consumer and being able to act on that more quickly because they're not subject to the difficulties of turning a much larger ship, so to speak, right?

What other advantages do local stores have over Big Box chains?

They are able to quickly build out an online presence—more quickly than a very larger player could, just because of the fact that it's relatively simple for them to do that if they can spin off a website to serve their local community and then have the inventory on hand and available to either offer pick-up in store or ship via a peer-to-peer delivery network directly to those local customers. Those are just some of the benefits that they have that a larger player doesn't that enable them to quickly respond to these trends.

They're also—we've seen this happen, and it's quite common in other wholesale distribution industries—but they're able to sometimes band together, like smaller specialty players or regional chains are able to band together to leverage greater pricing power over some of the suppliers. Through that they can get some of the benefits of the economy to scale that those larger players enjoy, while also maintaining that local, nimble footprint.