Retail stores are closing in record numbers. According to a research report by brokerage firm Credit Suisse, it\’s possible that more than 8,600 brick-and-mortar stores will close their doors by the end of 2017. Many well-known brands such as Macys, Sears and JC Penny are not doing well in today’s marketplace. By comparison, the Credit Suisse report stated that 2,056 stores closed in 2016 with 5,077 stores shuttered in 2015. The worst year on record was 2008, when 6,163 stores shut down. If stores do close at the rate Credit Suisse is projecting, it could mean America will lose more than 147 million square feet of retail space this year. The country is clearly going through a shopping shakeout, as an increasing number of consumers are making purchases online. Management teams in the retail sector have been slow to grasp this shift and have failed to adjust how they sell and deliver their products and services to customers. What does this trend mean for banks and mortgage bankers when it comes to origination?
One place to look for guidance is in the views and beliefs of the top business executives. In a recent letter to shareholders, Jeff Bezos, Amazon CEO, discussed how he believes companies need to operate to succeed today.
Bezos separates companies into Day 1 and Day 2 companies: Day 1 companies have a customer obsession and are more interested in outcomes than process. They also don’t fight the future and are able to make fast, quality decisions. Day 2 firms care more about maintaining the status quo. According to Bezos, these companies become irrelevant and then decline before eventually going out of business.
Bezos stressed that Day 1 companies such as Amazon are always focused on these four drivers. Here are some of the key points he made:
• Customers are always “beautifully, wonderfully dissatisfied,\” Bezos writes. “By being obsessed with pleasing customers in ways they don\’t even ask for – and thus can\’t articulate in a survey” companies can win the business.
• While not dismissing beta testing or surveys, Bezos writes that great customer experience comes from \”heart, intuition, curiosity, play, guts, taste.\”
• While big, disruptive trends are not hard to spot, Bezos writes they can nevertheless be difficult for large organizations to address. While Amazon began as a mere book-seller, today artificial intelligence informs much of what the company does. Management\’s nimble nature and willingness to adapt has kept the company at the forefront of major tech trends. Its Alexa smart assistant has been a massive hit and its Echo hardware has been hard to keep in stock, with some estimating the company sold 7 million units in 2016, more than double the company\’s original projections. Not only that, but AI is also improving Amazon\’s core business with search recommendations, demand forecasting, and other aspects of the \”old\” Amazon.
• Bezos talks about the importance of making good decisions quickly. \”Speed matters in business,\” Bezos writes. \”Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you\’re probably being slow. Instead of wearing each other down with exhaustive debates,” he said that he often \”disagrees, yet commits,\” to a course forward, and will correct later on.
My favorite point Bezos made is about not fighting the future, an issue I see at many mortgage firms. If a book seller like Amazon can get in front of the customer why can’t a mortgage company do the same? Obviously, Quicken has made the jump and their mortgage share reflects it. As always, this type of shift starts at the top of the organization with the vision of senior management. The first question to answer is are you a Day 1 or Day 2 company?