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Ask The Expert: Richard Baum

Richard Baum

Retail has had a hard past few years—thousands of store closures, hundreds of bankruptcies, and dozens of buyouts to stay afloat. Amidst all this, some retailers are finding a way to excel, be it through technology, experience, or personalization. We spoke with Richard Baum, co-founder and managing partner of Consumer Growth Partners, a private equity investment and advisory firm with an exclusive focus on retail and non-perishable branded consumer products companies, and RMS Board of Directors member, to talk key players, marketing strategy, and how companies can survive this retail apocalypse.

What is the biggest hurdle retailers today are facing when it comes to maximizing growth and profitability? 

How to increase traffic into their stores or to their websites. With so many consumer purchase options in terms of products and channels, it’s a big challenge for every retailer to get their “fair” share of bodies in their store or eyeballs on their sites. To do so requires an uncanny knowledge of who your consumer is and a set of strategies and tactics to drive those customers to you. With many “big data” options available to retailers, there’s no longer any excuse for not mining your customer data with a goal of developing very targeted marketing strategies across multiple channels.

What companies are performing the best when it comes to retail strategy?

There are shining stars in several sectors of retail. By far, the single best performing sector is off-price retail, where a number of companies are performing extremely well, including TJX, Ross Stores, Burlington Stores, Olli’s, and Five Below. Among the Big Box Retailers, Home Depot, Best Buy, and Costco are standouts. Nordstrom is the acknowledged leader in the department store segment. Of the mass merchants, both Walmart and Kohl’s continue to be leaders. We’d call out Lululemon among specialty softline retailers, Restoration Hardware among hardlines retailers, and Warby Parker among digitally native brands. Of course, Amazon continues to grow like a weed and gain market share across many product categories, although the company has yet to turn a profit in its retail business.

What steps would you recommend to a retailer who finds themselves on the decline?

 First and foremost, make sure you have enough cash to weather the storm, as it will likely take longer than management thinks to turn the tide. Struggling retailers need to evaluate their store fleet and either close underperforming stores or renegotiate rents, where possible. Omnichannel retailing is becoming table stakes, so every retailer needs to develop an online strategy, whether it’s with their own website or through affiliates, including Amazon (if you can’t beat ‘em, join ‘em!) Lastly, figure out who your loyal customers are and develop strategies that market to them and provide them the opportunity to buy your products wherever and whenever they see fit.

What areas of tech do you think have had the biggest influence on retail in the past year?

It’s probably the rapid penetration of mobile applications to retail. It’s not surprising that such a large percentage of searches now begin with the mobile phone, and that the most rapid increase in the number of purchases now take place via mobile apps. As the single most ubiquitous piece of hardware owned by consumers worldwide, it should come as no surprise that mobile devices will soon become the preferred purchase vehicle for all kinds of products, from food to apparel to automobiles.

What company, if any, do you think could challenge Amazon as a titan of retail?

There are actually two challengers: Walmart and Alibaba. Walmart is making a big push into the online selling arena, having acquired Jet.Com a few years ago to anchor its move online. Subsequently, Walmart has acquired a number of digitally native softline retailers, such as ModCloth, Bonobos, Moosejaw, and most recently Eloquii. They have the infrastructure and capital to challenge Amazon over the next decade. Alibaba is the mirror equivalent to amazon in Asia where they dominate that online market, as Amazon does in the U.S. So far, each has largely stayed out of the other’s home market, but it remains to be seen how long that standoff will last.

What do you think will be the biggest trend for retail in 2019?

With online retailing continuing to account for all the retail growth, one of the most important themes in 2019 will likely be the continuation (and perhaps acceleration) of physical store closings and the potential bankruptcy of several prominent retailers, including but not limited to Sears, JCPenney, Stein Mart, and Barnes & Noble. There are several factors behind these potential bankruptcies, including an overleveraged balance sheet, failure to remain relevant to their consumers, and lack of any competitive advantage.

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