Omnichannel Retail and Luxury

Rejuvenating the Retail Executive: From Merchant to Customer Activist

 



​Has Amazon killed the retail star?

The global retail industry is in a state of flux. Once iconic brands are struggling with too many stores, too high a cost base and too little differentiation.

Customer is King, Queen and Emperor

Amazon did more than just introduce an easier way to shop; it changed the balance of power. Consumers now comparison shop, read reviews, order anywhere, return purchases, and manage subscriptions from their smartphones.

Unprecedented levels of transparency have lifted the lid on companies’ sourcing and production practices. This forces retailers to consider the customer in what used to be back-office activity.

Amazon’s model of putting customers at the heart of the purchasing journey has also triggered a revolution in expectations. Whereas customers were once just a link in the value chain – just one of many stakeholders – they are now everything.

Retailers are responding, but is it enough?

Retailers must align their operations – not just their products or platforms – with their customers’ evolving preferences and behaviors. A systemic customer re-orientation is what is required for success in retail, and organization-wide transformation is the only way to get there.

This has created a new breed of retail leaders: customer activists, not merchants.

An executive for a new era

It takes a unique leader to successfully lead a transformation. A look into their backgrounds and personality profiles helped Russell Reynolds Associates paint a picture of today’s retail leaders.

Using proprietary data around retail executives and a wider database of psychometrics, we set out to answer the following questions:

  • Who are the retail leaders of today?

  • How are retail executives different from other executives?

  • Are retail leaders disruptive enough?

  • How will the customer activist arise?

  • How can retail executives prepare for the future?

  • How will retail leaders change?

  • How will the organization change?

Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years average annual growth has increased to $40 billion. “That is the tipping point, right there,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It’s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating.” This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.
-Michael Corkery, New York Times, April 15, 2017

Who are the retail leaders of today?

Where is the customer?

Despite a retail landscape that is dynamic and constantly changing, retail leaders remain homogenous and insular.

Russell Reynolds analyzed over 300 retail executives globally. Of those, 84% were men, the average age was 54, and over two-thirds had been internally promoted – the majority of whom spent an average of 15 years with the company before taking their current position. Even those who were external appointments typically had retail experience.

While lengthy in-industry tenure brings deep understanding of traditional retail, it limits the learning gained from exposure to other, more innovative, sectors.

 

As the relationship with the customer changes and moves from transactional to conversational, retail leaders can no longer solely rely on simply being a great merchant. They need to actively advocate for and reflect the diversity of an increasingly complex customer base.    

How are retail executives different from other executives? 

Leveraging the merchant in a customer world
Using our proprietary psychometric database, we compared 256 retail executives at the C-suite and vice president levels against the executive population in our database. The analysis showed that retail leaders are socially bold, persuasive, and assertive with a desire to win. They stay the course, drive for results, and trust others to execute. At the same time, they have a tendency towards doing things as they have always done, which restricts their toolbox and, thus, limits their ability to fully engage with the customer.

    

Are retail leaders disruptive enough? 

Far from disruptive

We have compared the psychometric profile of retail executives to the profile of those executives who have been involved in disrupting industries—we call this group Productive Disruptors*. Productive Disruptors are bold in their strategic and leadership approach. They prefer innovation to tradition and push limits.

While retail executives possess some of the competencies of Productive Disruptors such as their optimism and achievement orientation, overall they score lower across all “disruptor” traits.

Retailers score especially low on competencies such as ability to think outside the box, being open to new things, and going against the grain. Retail executives also show less agility and empathy, which may hinder their ability to truly advocate on behalf of the customer.

    

How will the customer activist arise?

Delivering a systemic customer re-orientation of the business

Retailers have made only incremental changes to their business models to meet customers’ needs. These changes involved responding to customer demand by adding new sales channels, such as e-commerce, offering more flexible delivery methods, enhancing and digitizing back-end operations and CRM systems.

However, nimble and innovative players have already been orienting around and anticipating the desires of the customer. The customer-driven organization-wide transformation will require retail leaders to change their organizational structure, their culture, and their ways of working. Only then will they be able to act as the true activist for their customers.

 

How can retail executives prepare for the future?

Cultivating critical competencies among retail executives

Retail organizations need leaders with a rejuvenated leadership profile to help them through this time of transformation and position them, and their businesses, for growth. The good news for retail executives is that what makes for success in a massively disrupted industry are competencies that can be cultivated – not traits that are inherent to their personalities.

Our Leadership SpanTM framework - shown here and derived from analysis of over 5.5 million leadership cases - posits that a retail executive’s ability to thrive through constant change hinges on the ability to act in ways that on the surface seem at odds with each other.

Looking, for example, at the area of strategy setting, the effective retail leader can flex between a highly pragmatic and highly disruptive decision making style. The embodiment of these competing competencies in a single leader represents their “leadership span” – the higher an individual scores in both “competing” traits the bigger the span for that competency. This ability to span and flex across apparently contradictory leadership styles is the key for retail executives to survive and ultimately thrive.

 

How will retail leaders change?

 

How will the organization change?

Enabling retail transformation

Retail executives should explore ways they might broaden their competency span and develop their leadership. In addition to examining their own approaches, leaders can develop the capacity of their organizations to thrive in three distinct ways:

 

Sample and methodology

In April 2017, Russell Reynolds Associates conducted a detailed review of the profiles and career paths of global retail leaders.

  • We identified the 64 largest retailers by revenue globally*. We chose retailers aligned to 6 retail segments and within each segment we represented three global regions.

  • In total, our analysis included 338 individuals who were part of the leadership teams at the identified companies.

    

  • In addition, we analyzed proprietary psychometric data for 256 retail executives at the C-suite and vice president levels and compared that against an average executive profile calculated from more than 8,000 data points

*Global Powers of Retailing 2017, Deloitte

 

AUTHORS

ANTHONY ARMSTRONG is a member of the global Consumer Sector advising clients within the retail and consumer goods environment on succession planning, leadership assessment and recruitment of outstanding leaders. He is the country manager for Australia.

CLAUS FISCHER co-leads the firm’s Global Retail and Luxury Practice and is a member of the Consumer Sector. He focuses on senior executive searches and leadership assessment for clients across Europe. He is based in Hamburg.

RIC ROI leads the firm’s Leadership & Succession Practice for Asia Pacific. He provides advisory services to a wide range of corporate clients and executives across the region. He is based in Singapore.

KRISTYNA JANSOVA is the knowledge lead for the Retail Practice and a member of the Diversity and Inclusion Practice. She is based in London.

MALLORY SAMSON is the Global Knowledge Leader for the Consumer sector. She is based in Chicago.

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Rejuvenating the Retail Executive: From Merchant to Customer Activist