On May 10th, retailers like Macy’s (NYSE: M) announced earnings that were substantially lower than previous year periods and their stocks were punished by investors. On the same day, a federal judge ruled against the Staples-Office Depot merger on anti-competitive grounds. The companies announced their plans to abandon the merger and Staples will pay Office Depot a big breakup fee. Wall Street showed no mercy and clobbered Office Depot (NAS: ODP) stock the next day, dropping it around 40% on massive volume.
At the same time, no less than the legendary The Walt Disney Company (NYSE: DIS) announced disappointing results on segments of their business including ESPN. Analysts blame the continued move away from cable subscribers by Millennials for much of the weakness (despite ESPN being available on mobile and other devices) and Disney stock dropped by more than 5% next day.
If you watched CNBC, the experts were all talking about the surprising rate of adoption of technology in the marketplace and how there has been a virtual abandonment of mall shopping by Millennials in favor of Amazon (NAS: AMZN). Indeed, more than half of all retail growth reported last quarter went to Amazon which left very little for all the other retailers. Questions are now being asked about survival for major retail brands like Sears, and even Macy’s itself. Office Depot is predicted to end up out of business and Staples’ future is in doubt as more businesses buy office supplies online.
Why are investors surprised? Hasn’t this and the move to Omni-Channel retailing been forecast for some time? For sure.
There’s More to the Story
There is a massive disruption going on in the world and certainly technology has been a driver with “The Internet of Things” and the rapid adoption of mobile as a way of life. Simultaneously, we are seeing the largest generational transition in history which is resulting in a seismic cultural shift. Boomers are rapidly giving way to Millennials who are the first generation of digital natives so they naturally gravitate in that direction.
Every business large and small is affected in some way from dramatic to catastrophic, and speed is a factor many are struggling to deal with. In short, last year’s decent operating businesses are suddenly looking over the edge of a cliff to potential extinction unless they are willing and able to accept the changes going on and can immediately trigger plans to adapt their business models. It’s proving to not be easy for many.
There seems to be three classes of businesses developing in the market right now:
- Those who have seen what’s coming, developed plans to adapt and are executing those plans;
- Those who are recognizing now what’s happening and working to adapt but haven’t really started yet;
- Those who are “staying the course.”
Those choosing to “stay the course” are in for a rude reality. Their time is running out and it may already be too late to turn the tide. How much time is left? Consider that by 2020 fully 75% of our workforce will be made up of Millennials (those born from 1982-2000). Millennials, as digital natives, act and behave very differently than all prior generations and we see examples every day of the collision between Boomer and GenX management and Millennial employees and customers. There’s help for this group of businesses, but in four years or less it may be too late.
As they say on the ubiquitous commercials: “Act NOW!”
For those recognizing the changes underway but haven’t acted yet, time is also not a friend. But the good news here is that you have cleared the major first hurdle…acceptance… so you can get busy working on plans and actions. Here’s the simple advice:
- Learn all you can about Millennials
- Learn to recruit and retain Millennials in your workforce
- Make sure your business appeals to Millennial customers
The advice may be simple…but we never said executing on that advice would be easy.
Oh, and so you aren’t surprised in the future, Gen Z is on its way behind the Millennials. Fortunately, you have a little time to plan for that, but not much as the oldest members of GenZ are already in high school!
Chris Petersen is Managing Partner at On Brand Management, a diverse problem-solving firm helping clients navigate today’s dynamic market by providing performance-driven solutions to sustain an organization’s stability and growth. Contact Chris at email@example.com. To learn more about On Brand, go to www.onbrandmanagement.com.