the BIG sell
A day of reckoning.
PRELUDE
Uncertainty breeds anxiety, then fear, then panic, if unchecked it leads to chaos and then utter collapse. Greed is a quickest way to turmoil. On September 15, 2008; Lehman Brothers filed for bankruptcy; hurtling the world toward financial oblivion.
“What the Israelites saw, from high on the ridge, was an intimidating giant. In reality, the very thing that gave the giant his size was also the source of his greatest weakness. There is an important lesson in that for battles with all kinds of giants. The powerful and the strong are not always what they seem.”
““I have a feeling, in a few years people are going to be doing what they always do when the economy tanks. They will be blaming immigrants and poor people.””
SCENE 1
a colossal miscalculation
We took the early AMTRAK down to Penn Station in NYC. I like the train because you can walk around, and they have got decent WIFI. You can get some work done or read a book. The food is lousy, but what do you expect - it is a train! New York is about 3.5 + hours on the Northeast Regional.
In the fall of 2008, we were New York City; walking down 7th Avenue to a clothing show called "Atelier." It was a bright, sunny September 15 morning. Some people call this “crisp.” As we approached the turmoil and chaos of Times Square, we stopped dead. Something was seriously not right, dozens of people were tumbling out of the Lehman Brothers' offices carrying cardboard boxes with a myriad of different personal items; but all were looking dumbstruck, dazed and bewildered. Above their heads, a green LED ticker with stock exchange alpha numerics chased around the Lehman Brothers building. We had no idea what lay in front of us all.
Content “Investopedia” 2019
“Quartz” 2008
“The problem wasn’t that Lehman Brothers had been allowed to fail. The problem was that Lehman Brothers had been allowed to succeed.”
Fire Opal is our small independent family business. We’re a Boston boutique, specializing in new “American handmade crafts”. Truly said, we are a real mom + pop shop, my wife and I work at each of our 2 Boston locations. (On June 30, 2019, we downsized to one store). We’ve been so fortunate and super lucky to survive the stormy economic seas and skate on the edge of the future. What does American handmade crafts really mean?
Content Fundera 2019
Made in America…? Incredibly naïve and not cost effective? That’s a business plan so archaic and out of touch that it cannot possibly work. It’s an express line to failure? Something the cynics can ponder - our talented artists, craftsmen and designers are refreshed each season with bright new younger makers joining the ranks. New ideas, with new generations, and new visions to make real.
“Handmade” is a condition that will never satisfy our "requirement" for immediacy? We're an "on demand" culture. Too outmoded to be relevant? My feeling is people yearn for things that were made one at time, by another real person. Makes you feel more human. Handmade is a vision to express what it’s like to live in the time we live in.
“Crafts” is a term some people are suspicious of. A craft product can be elegant, sophisticated, unique and stunning. For Fire Opal it’s jewelry, women’s clothing, and home goods. The crafts community surprised me; it’s a matriarchy with a very equal and a lateral community structure.
Emily Johnson EC Design www.ecdesignstudios.com
By my count, Boston has seen 11 craft galleries go down since 9/11. During the 2018 season we saw small business retail unsteady and uncertain. In 2018 we were down about 12%; but the real eye opener was 800 fewer transactions. I can see how our numbers mirror other small businesses nationally.
We had planned on closing the Jamaica Plain, (a Boston neighborhood), store in 2019—downsizing, making way for my retirement. I could not walk away until I discovered what went so wrong? Owners were closing up shop due to business losses and retirement. As a courtesy, I called one of our artists to tell them that I was retiring, and that we were closing the J.P. store. I was shocked, when I was told we were the 7th to store close—just 2 weeks into 2019.
My first question was who makes up a customer base? Retail's current market is primarily composed of 3 American generations: Baby Boomer 1946-1964 (73.47 million) the Generation X 1965-1980 (65.71 million) and the Millennials 1981-1996 (71.86 million). On the horizon is a significant population bump—Generation Z, born in 1997 and later, will number 86.43 million.
Content Pew Research Fact Tank 2018
the dominos are falling 1
The Hanukkah Story
It was a snowy afternoon, but it was almost dark at 4pm. The store was cozy and packed. When people are really focused, it seems like there’s a buy-vibe - you can actually feel it. There is a caveat, when Sheryl Crowe, is singing “All I Wanna Do”, women of a certain age will sing along. Loudly. Many of our customers were in, so I walked around catching up, checking for any questions and general chit-chat.
Long before I got into retail, I was doing my grad work at the University of Michigan. My wife Sue and I met in an art class. Then something unbelievable happened. I was 1 week out of grad school when I was hired to be acting head of a graduate program at Cranbrook Academy of Art, in Bloomfield Hills, MI. I ended up staying for 20+ years. Grad students would range in age from about 22 to late 30’s. I began to understand why they were at Cranbrook. I recognized graduate students are complex people, in a complicated time of life. They were there for an MFA, but in reality, they’ve just rolled the dice on themselves, their own creativity, their ability to grow, in unknown ways, as an artist and as a human being. At Cranbrook, you not only ran the show - you were the show. As artist-in-residence, you headed the department, ran the program, were responsible for your budget and recruitment. If a light bulb needed to be changed or a floor needed to be mopped, you took care of it. At that time, I was a young guy myself and was trying to get a fix on this academic terrain and landscape. We would be called Print Media and we would become “outlaws” and we would be very dangerous. I bring up this personal experience, because I learned to treat our customers like grad students…very dangerous grad students.
All the while, I noticed a young women bundled up in a dark coat and a couple of dark brooding scarves - art school style; but what I really noticed was her bountiful long wavy hair, that was trying to break free and rejoice. When she was ready to check out, she brought maybe 8 or 9 very carefully selected items. She had a winsome look anticipating how her gifts would bring joy and love. We got everything gift wrapped and put everything into 2 large Fire Opal shopping bags. Then she disappeared into the snowflakes.
Maybe 45 minutes later, she returned, but she could hardly speak. In between massive sobs she said she put her shopping bags into her forest green Subaru. There were errands to do and if she got ahead of them; she’d clear out her weekend. When she went back to her car the bags were gone. She had done all her Hanukkah shopping with us. I felt terrible about what had happened to her. I paused for a second, to gather my thoughts; then I said Fire Opal would like her to go back and find the item or something similar and it would be on us. Just knowing we had plan in place, she sighed deeply, in between gentler sobs. Then she left for a cup of coffee. I thought who could do such an awful thing? Why? Boston can be funny like that. A woman burst into the store and lifted up two shopping bags high above her head. From the threshold she shouted out, someone had put these Fire Opal bags in her car, and someone must be looking for them?
I turned to our employees and we could not believe where this story was heading. When our emotionally drained shopper returned; she turned to us and in between sobs, said, ..."this shit never happens." That’s kind of true. I guess there’s a logical explanation; but we preferred to believe it was divine intervention.
Scene 2
THE DEATHBLOW
Twilight lives in those tiny moments when the daylight bids sweet dreams to a curtain of darkening skies. This light is the softest and most soothing; but disappears in a whisper. America snuggles up in its tragedy quilt and tries shut its eyes. We are no longer a nation of security, peace and trust. Might our truth be lost forever?
I’ve chosen 4 events that range 2001 - 2019, roughly a generation’s time. If you grew up in this era, these events shaped you; 9/11, Bernie Madoff scandal, the Great Recession of 2008, and in 2019 the retail apocalypse. This generation is shaped by loss. The loss of trust, loss of our values, loss of dreams. America is a little bit broken.
“In the land of the blind, the one-eyed man is king.”
9/11
-cause -
On September 11, 2001, American Airlines flight 11 departed BOS Boston’s Logan Airport and crashed into the North Tower of the World Trade Center at 8:46 am. This was the first of 4 attacks, killing 2,977 people.
-effect -
With this horrific loss of life, al-Qaeda and Osama bin Laden, cruelly mocked America by weaponizing American planes, crashing them into the WTC—destroying an American symbol of global power, and on 9/11—America’s emergency call number.
America is no longer an unassailable world power. We are a vulnerable terrorist target. Our American spirit has been brutally shaken
Bernie Madoff’s Ponzi Scheme
-cause -
On December 11, 2008, Bernie Madoff was arrested for defrauding thousands of investors out of tens of billions of dollars, and money laundering. “Everyone was greedy, everybody wanted to go on and I just went along with it.” Madoff’s Ponzi scheme worked like a pyramid scam; new investors created the “profits and payouts” that went to his earlier investors. He was only caught because he could not make up the investor’s redemption demands after a 39% stock market downturn.
-effect -
In 2009, Madoff was sentenced to 150 years and lost his ill begotten $170 billion. Was it greed that kept Madoff’s investors from asking why their returns were 10—20%? Bernie Madoff has petitioned Donald Trump to commute his sentence. Our country’s sense of truth, honor, and values was forfeited … for lies, complicity and inhumanity.
Content from Investopedia 2019
The Great Recession of 2008
-cause-
Deregulation of the financial sector, subprime mortgages, and the housing market bubble
-effect-
Greed, again. Only one American was convicted, (conspiracy to falsify books and records), for his role. Our moral compass is lost.
Kareem Serageldin of Credit Suisse
retail apocalypse 2019
-cause -
Residual effects of the 2008 Great Recession, large chain stores filing Chapter 11, the over expansion of malls and the closing of 12,000 bricks-and-mortar stores since 2010.
-effect-
We are seeing a slow-motion car crash of other bricks-and mortar business, so vulnerable to online merchandizing and technology. The “Netflix effect” will be swallowing up America’s movie theaters. In 1995 we had 7,744 movie theaters, this diminished to 5,803 in 2018. Small rural movie theaters will most likely face extinction.
“The Atlantic” The Great Retail Apocalypse of 2017, New York Times 2019, Moneywise 2019
desperation island
Generation X
Gen X’ers were born between 1965-1980. They are a small population sandwiched between the Baby Boomers and Millennials. The Gen X'ers have true feelings of disconnectedness and upheaval, which is understandable, as a result of their parents, the baby boomers, divorce rates of nearly 50%.
“I was by the fridge in the kitchen when it happened. The phone on the wall next to the fridge rang, and so I went to pick it up when suddenly the ice maker began spontaneously chugging out cubes and I thought that was odd. Then a cupboard door opened by itself, revealing the dishes inside and then the power in the overhead light surged. The game show playing on the countertop TV then suddenly stopped and the screen displayed color bars with a piercing tone and then, for maybe a second, there was a TV news anchorman with a map of Iceland on the screen behind him. I said “hello” into the phone, but it went silent and then the flash hit. A plastic Simpsons cup from Burger King melted sideways on the counter; the black plastic frame of the TV softened its edges and began dissolving. I looked at my hand and saw that the telephone was turning to mud in my palm, and I saw a bit of skin rip off like strips of chicken fajita. And then the pulse occurred. The kitchen window blew inward, all bright and sparkling, like tinsel on a Christmas tree, and the blender crashed into the wall and the Post-it notes on the fridge ignited and then I was dead. ”
SCENE 3
DEAD MALLS
Dead or “ghost malls” are creepy reminders of economic decline and changing retail trends. Starting in 1956, shopping malls proliferated until the late ’90’s, bulging to about 1500. Naming malls with a sense of modernism and inclusivity—like Shopper’s World, Summit Place, Shopping Town Mall, and The Great Mall of Great Plains; gave a sense of belonging—you're part of a greater whole, even a part of a greater good. As online shopping erodes the megalith mall, the loss of anchor stores and the move to outdoor shopping plazas are turning fixed location malls into dinosaurs.
There are some interesting retail shifts going on. The old school axiom “shop to buy and shop to eat” assumes shoppers have the time and are not inconvenienced by mall trekking. Newer concept outdoor malls are surrounded by parking options to target your stores and get you in and out faster.
New outdoor plazas are better “curated”. Another shift—popular digitally native retailers, that were first exclusively online, have found that customers want a face to face interaction to get a better feel for their products.
Content Forbes Pamela N Danziger October 2018
BuzzFeed 2009 Randall Park Mall North Randall, OH, opened 1976
A PARABLE
THE DOMINOS ARE FALLING 2
THE RING STORY
Our store, Fire Opal, is in the heart of Jamaica Plain. You can’t ask for better placement. As you know, Boston is home to so many students from all over the world. An extremely joyful couple bounced into the store. The man was tall about 6’4” or 6'5", with blond hair, very strong, solidly built, and with a German accent. He wore a blue-oxford button-down shirt, with the long sleeves rolled up, khaki shorts, and sandals—if you said he was dressed like a PhD candidate; I'd have to agree. She was dressed head to toe in black; a cotton 3/4 sleeve top, baggy cropped pants, sandals and she was Asian. It was a sizzling July day. It seems he proposed about a block away at JP Licks, our local ice cream emporium. I sized them both. She turned out be a teeny tiny size 3. Our ring sizer goes down to a 1, but that's diameter of a straw. He was a big guy and I sized him to a 14.5 on his left and 15 on the right. Your dominant hand is usually about a half to a full size bigger. We did both hands because he noted in German culture, the wedding ring goes on the right hand. I guessed she was working on her command of English, because the man did all the talking.
They peered into the jewelry case and found two yellow 18K gold rings. The couple liked their choices and that they were made by the same jeweler. He smiled, she nodded. Usually we take a 50% deposit, but he insisted on paying in full. I asked when they were getting married? He said whenever we get the rings in. I gave them a 4-week turnaround time. These two were overflowing with happiness. They were bouncing off the ceiling. When the rings came in it was 11:00am, and I remembered if they got the rings in time, they could do a civil ceremony the same day. I left him a message
He walked in about 5pm. I figured they would have a ceremony sometime soon; but just not today. I got the two rings out for him and he tried on his ring and it was a good fit. I asked him if he wanted to take his fiancé’s ring for her to try on. He looked down at his sandals and said no, please just put it in a ring box. They looked stunning together. I asked him when they thought they might be getting married? Still looking down at his feet, he said she went back to China. I wanted to believe the wedding would be in China. I stole a look at him. His face sagged emotionally beaten up. There would be no wedding.
I thought how sad this was for both of them. Special orders are not refundable; especially size 3's, but this is the good thing about being self-employed. I extended my hand out to take back the rings. I said I’ll refund you the full total. But this big bear of man looked at me and said he wanted both rings. I did not want to make this harder then it already was. We said our goodbyes and he shuffled off.
EVERY ONCE IN A WHILE, SOMETHING WOULD POP INTO MY HEAD AND I’LL REMEMBER THE RING STORY. HOW HEARTBREAKING IT MUST STILL BE? I WONDERED IF WOULD HE KEEP THE RINGS AS A SYMBOL OF THEIR LOVE. PART OF ME WONDERS IF HE’S LOOKING FOR ANOTHER SIZE 3.
Millennial Nation
Millennials are almost exclusively online shoppers. Mobile devices will deliver user content, compare product reviews and even make purchases on their mobile platforms. No malls for Millennials.
The power of the "Amazon effect", has already shaken up the bricks-and-mortar retail forever. For Millennials, the strongest purchasing factors are convenience, peer reviews, and influencers; to help shape their spending. Millennials do online orders from 25% mobile, 32% laptop, 24% tablet. Only 11% through actual bricks-and-mortar retail. 11% is a huge problem!!!
The Millennials are the best college educated generation at 34.9%. Generation X is at 34.6% and the Boomers 31.1%. In 2017, Pew Research set “household adjusted” income for these 3 generations was Millennial’s $69,000, Generation X’s $85,800 and the Boomer’s $77,600.
An ideal Millennial setting starts with urban “lifestyle villages”, clusters of specialty stores, coffee shops, bakeries, small independent shops; all places to meet friends and share experiences together.
big blue wave
Another way to look at this is through the ballot box. In the 2018 Mid-Term elections, GenX, the Millennials and Generation Z tallied 62.2 million votes to the Boomers 60.1 million votes. Together, these 4 generations had the highest voter turnout in 4 decades and the most diverse voting body ever.
Pew Research Center 2019, US Census Bureau 2019
Old man
One of our youngest entrepreneur’s down the block paid me a visit. I thought, here is a nice gesture asking for some sage advice. He said,
“Steve, I have two questions for you. What’s your online plan and what’s your exit strategy?” "Exit what???" I was stumped, So I went with our retail standard, “think it might rain?”
RACE TO THE BOTTOM
Bricks-and-mortar going head to head with online retailers, is a no-win situation. “Retail apocalypse” sounds like a movie sequel? A record setting +8000 stores closed in 2017. The numbers are staggering. In 2019 store closings are projected to 7500. By 2026 UBS Investment Bank predicts 75,000 stores will close.
A case that parallels small independent business downturn are the failing of small New England liberal arts colleges. Our returning WW II GI's and later the baby boomer's continuing a flood of new students and tuitions to college campuses; it seemed endless.
The model for the 50's and 60’s is not working. Tuition, room + board and fees for Boston University, academic year expenses for 2018/2019 $72,052.
For the 8th straight year, college enrollments have decreased. In 2017 there was a 300,000 decline in student college enrollment.
Boston University 2019, “Inside Higher Ed” 2019
Study abroad programs have served as college’s and university’s as enrollment enticements. From 2016 to 2017; 332,727 students studied abroad. These are incentivizing faculty perks, sabbaticals and plum teaching assignments. Online higher learning is taking a similar marketing approach which can really benefit these campus-less colleges. Some deep pocketed schools have even been buying up properties for their global study programs.
USA Study Abroad 2018
By the end of this next decade you may see as many as 50% fewer colleges and universities. Both colleges and small business retail might be absorbed only to become big box and franchised brands. Monster stores and mega universities.
“We cannot change anything until we accept it. Condemnation does not liberate, it oppresses.”
UNIQLO, is a Japanese less expensive “fast fashion” global clothing giant. Their business model is very cohesive from design to production to retail and season to season; yet they don’t own a single factory. UNIQLO has begun closing its suburban retail locations and focusing on urban showplaces. They were just competing against themselves; the suburbs can buy it online.
Not a small business model, but they’re very agile. They think big, but they roll multigenerational. Hello bricks-and-mortar!!! Keep an eye on UNIQLO; they seem to be able to turn on a dime.
Final thoughts
the c - word
Convenience - True story. We have an online store and 2 brick-and-mortar stores: only 3 miles apart. We’ll have customers, who make online purchases; but want it shipped to them, even though we’re in the same zip code and they pay for shipping. Quality is no longer king. It’s convenience!
Online returns average abuts 30% for merchandise; with clothing closer to 40%. Americans will return $550 billions of merchandise. Compare those numbers to bricks-and-mortar of only 8 - 10%. Businesses are taking a huge hit to their net. With free and expedited shipping, the volumes are enormous. This effecting is our economy, but what about our environment?
Convenience is not one size fits all. The subscription pay per item model is based on selling a service or item per month or year. Netflix is a good example. This custom tailoring is often called the “subscription economy”. In 2011 ecommerce subscription was $57 million and by 2016 it ballooned to $2.6 billion. Simple? Well, they do have your card #.
“Shopify” 2019
In the business of convenience, let’s take a look at bottled water. Americans drink 1500 bottles of water per second. There’s a mass of floating trash and plastic in the Pacific, the size of Texas. The world’s biggest bottled water companies are #1 Aquafina (PepsiCo) and #2 Dasani (Coca-Cola). Both companies get their water from Canadian municipal sources - tap water! Pepsi and Coke make double the revenue from water, then their own signature carbonated beverages. From a consumer perspective, you should be aware bottled water is marked up 280,000%,
THE DOMINOES ARE FALLING 3
the crier
We do about 30% of our entire year in three weeks in December. All the chips are on the table. Super stressful time. We just got in some opulent handblown glass balls. Glassblowing is punishing hard work and physically exhausting. It takes its toll.
We just heard from one of our blacksmiths, who made these beautiful cooking implements, herb choppers, cheese cutters and spreaders. These were like little sculptures; the aesthetic forms were masterful. Hung on wall rack, the shadows became hauntingly beautiful. You could imagine hearing the hammer strikes. All those years of repetitive movements caught up with him. He wasn’t able to lift his arms to his shoulders. He had to hang it up. What would this husband and wife team do after he was forced to relinquish his livelihood and dreams?
He probably had endured an incredible amount of physical pain; but had to keep pushing through it. There were no other financial options or safety net. No "go fund me".
This was a tiny order, especially as we were gearing up for the holidays. We didn’t really sell the glass balls anymore. We had plenty of inventory; but this is what we call a “mercy order”. That doesn’t need any explanation - right? I was checking in this order, making sure nothing was broken and matching it against the invoice. I was a little puzzled and thought something didn’t seem to add up? Their wholesale prices seemed really low. Glassblower’s have a lot of upfront costs and big overhead expenses, like fuel, glass and chemistry - that’s what makes those beautiful colors. I got out their file and looked back over their prices. I thought it was odd that their wholesale numbers stayed the same. Everything’s goes up, especially glass. I looked back 10 years and their prices hadn’t changed.
They were trying to hold onto their wholesale accounts. They could be operating at a loss. Another mom + pop operation. I knew she was just recovering from a heart attack. I looked back at the numbers and realized; they might not have enough to get by? They suffered in silence. I cried.
The next year, I heard our glassblower had another rotator cuff injury, plus the painful arthritis he suffered through. Now he couldn’t even work. That means no income. If you’re an artist you make your living with your hands, creativity and eyes. That made me cry again.
Andrew Harrer Bloomberg/Getty images
WTF
Dude, this is all Zucked up!
Here in Boston, the Cambridge Analytica scandal was big news. It’s hard to miss the symmetry of Facebook’s Harvard beginnings. Zuckerberg + Facebook have the familiar pattern of poaching your personal data and profiting from it by indirectly selling, (exchanging), user data with Netflix, Amazon, Microsoft, Spotify and 150 other companies. Zuckerberg is sharing this info data with telecom giant Huawei and Russia’s media outfit – Yandek. Facebook’s pattern of improper data harvesting, shielding detection, (follow the money), recently, paying fines ($5 billion) and a phony Zuckerberg apology and another empty promise to do better.
Changing your passwords is not an answer.
Maya Kosoff Vanity Fair December 2018
Photo by Toney Yin, 2013
As a small business co-owner, it is so crucial to support your community. One of our all-time joys was to sponsor a Regan League girls baseball team. We loved it so much! It took us 12 years, but we won it all in 2016.
I will really miss it.
Let us close it out with a Bob Dylan lyric, “There must be some way outta here?“
We find ourselves in the most complex and unsteady business era of our lifetime. How did this happen? There would always have been an Amazon, so do not blame them. There was always going to be a Millennial generation, it is not them, it is us. Retail is still all about products, customer service and marketing. But it’s still about communication. Let us not forget our words should still mean something.
“What’s dangerous is not to evolve.”
MY OBSERVATIONS
Change or hybridize your business model. Online shopping will only become even more immersive.
Social media is the new temple of retail. Say a prayer.
Redefine your customer service—online is customer friendly with the ease of returns and free shipping
Online retail has so many more variations, colors, sizes, and inventory for customers to choose from. Bricks and mortar must learn how to order more strategically
An imperative - in-store prices must match online $$$.
Your new market is a young generation of customers + getting even younger.
Time to change the retail mindset from survival to evolution.
If your business can be multi-generational, I would really get behind that.
The most important thing, I learned from the store is kindness. I only wish I would have learned it sooner. Quite simply, Business is Darwinian. It always has been.