When you’re piloting a commercial jet, losing altitude and in danger of an imminent crash, the instinct is to quickly pull up on the controls as hard as you can.
It’s only logical, right? You’re going down, so you pull up. (There’s also a mechanical voice blaring, “STALL! STALL! STALL!” that helpfully adds to the pressure).
Except this is what sometimes happens when you pull up too much. You lose forward air speed. You sacrifice lift. The engine stalls out. More often than not, you crash. That is, unless you make a completely counterintuitive move and dive the plane.
Although an imperfect analogy (no one is dying in the comparison I’m making), it’s not dissimilar from what’s happening in retail today. Brands, under fire from the Street and watching their numbers decline, do the instinctual thing and pull back. But their caution and tentativeness nearly always results in a more precipitous decline. Instead, they need to dive the plane.
Diving the plane feels wrong, but it’s frequently the right call. When airline pilots are confronted with this life-or-death situation, diving the plane feels like a suicidal response. But push forward on the controls and you pick up forward air speed. You get back lift. Then you can start to climb again. Retailers need to do the same thing: dive their planes by sacrificing short-term altitude for long-term lift. That means letting go of the quarter-to-quarter mindset and getting very comfortable with feeling uncomfortable. It means understanding your short-term stock price won’t be great – and neither will your quarterly metrics. It means level-setting investor expectations.
Retailers must avoid pulling back on the elevator… For many retailers, it’s very difficult to tune out the market, which is screaming its equivalent of “STALL! STALL! STALL!” in an effort to spark an immediate turnaround. In the face of such enormous pressure, it’s all too easy to fall prey to the false concept of the easy fix. When you see a retailer firing and hiring CEOs too quickly, cutting back staff, closing too many stores, or putting too much in online too quickly, it’s a brand that’s doing just that: caving to external demands for a short-term win. It’s simply death deferred.
Companies that are private or who go private may have more leeway to try expensive or risky changes, especially when fueled by private equity. (To be clear, private equity is not a panacea for all of retail’s problems – it has both helped and hurt retailers – but it does remove market pressure).
…and instead push forward. Investing in the long-term outcome stabilizes the brand and will allow the company to rise again. Practically, this means sinking as much available cash as is feasible into innovation. Double down on what’s working and what’s sustainable for more than a quarter or two. Best Buy, for example, did this very well – first by investing in hiring and training highly capable store associates at a time when most were cutting staff. But today they’re astutely partnering with Amazon, most recently becoming the exclusive physical retailer for a new line of Amazon Fire and Alexa-equipped televisions.
As retailers regain their forward air speed, the metrics they’re worried about will begin to rise and pay them back. The stock price, once declining, will start to flatten out and stabilize. They can then turn to plans that will take the company from cruising to soaring.
When in doubt, remember Amazon. Amazon essentially invented and perfected the controlled dive for this industry. They maintained confidence in their approach, despite the mutterings of Wall Street, which hasn’t always rewarded the brand for its long-term strategies. For instance, Amazon reinvested profits back into the company in order to build its incredible network of warehouses and successfully deliver two-day shipping for customers. Did the Street see the value at the time? Not by a long shot. In fact, the market punished Amazon’s stock. But Amazon played it cool – they knew they could pick up enough air speed, which would let them increase altitude at a very fast rate without stalling. It was the best way to build long-term value, and the stock then increased.
There are documented instances of pilots that needed to dive their planes, not pull up (but these, fortunately, are few). The same cannot be said for retail. While not every retailers will have enough cash in the bank or investor appetite to successfully pull off a controlled dive, the majority are too scared or too uncertain to lean in and dive the plane.
But now more than ever, it’s urgent for those who can to muster resolve and dive the plane before it’s too late.