Higher education should look to the disruption in retailing and other sectors to develop a roadmap to the future. While no two sectors are the same, the notion that novel and implementable ideas can come from other alternative disciplines has a good history1. The parallels between retailing and higher education offer particularly fertile territory for consideration.
There are, arguably, particular similarities between department stores and universities. Both offer wide ranges of largely similar products and make claims about their quality, customer experience and real estate to justify premium prices. Moreover, in recent years both have been driven to special offers, discounting and increased marketing costs in an attempt to secure the volume of customers they need to survive.
Breaking Bad As Demographics, Technology and Globalisation Bite
The heyday of high street and the shopping mall, from the mid to late 20th century, coincided with the ‘massification’ of higher education2. The demands of the baby boomer generation coupled with consistent c5% annual real GDP growth in developed market economies from 1950 to the early 1970s3 underpinned both. Changing demographics and the relative decline in government investment has made higher education as vulnerable as retailing to changing market forces.
In that context, headlines reported a record number of over 7,000 store closures in 20174. While doomsday predictions that “50% of the 4,000 colleges and universities in the U.S. will be bankrupt in 10 to 15 years”5 may be wide of the mark, closures are accelerating. For universities it may be ominous that the major losers in retailing were department stores which “have been suffering a death by a thousand cuts for years due to poor merchandising and outdated business models”.6
Further broad comparisons between the sectors can be drawn. Technology is often cited as a key factor in the disruption of retail and higher education, and education is rapidly moving to a point where attendance at a bricks and mortar institution is optional. But even if technology had not created generations of digital natives who learn in new ways it has placed the power of search and comparison is in their hands.
Globalisation has also had a marked and growing impact in both sectors with a shift in favour of Asia Pacific over the past ten years7. China’s improving performance in global university rankings and its plans to be the dominant global centre for international students by 20498 suggest the direction of travel. The traditional distribution of international students from east to west appears to be shifting rapidly and institutions need to develop effective responses.
Finding The Path From Apocalypse To Renaissance
Against these headwinds there are a small number of universities in the world who may have the financial and brand strength to resist these global tides. Short of a catastrophic scandal, financial mismanagement or a government bent on vandalising its international credibility it is probably safe to assume that the likes of Harvard, Cambridge, and other national or private treasures are secure.
For the rest there is an urgent need to refine, realign and reinforce what they offer to students. A germane lesson for them from retailing is that, despite the headlines, overall in 2017 more stores opened than closed and retail sales grew by 4.5% (over $232bn)9. While the media were coining the phrase ‘retail apocalypse’, smart investors and business operators were moulding their offer to meet the needs of a changing world.
Retailers have invested significant brain power and cash in trying to find a way through the storm. Their focus on their value proposition – how they solve customers’ problems at the right price – is a useful tool for focusing on what is important. And there are a number of themes which universities might consider.
1. Provide unique and compelling products and experiences
Dreary, derivative and duplicated product lines are not enough in an era where a world of choice is accessible at the touch of a button. Universities must examine their own “product lines” (degrees and other courses) and determine how much they can be streamlined into areas that are both market sensitive and differentiable from the competition. While the campus experience is not dead it cannot be taken for granted, and the marketing lessons of experience-driven destinations such as national parks and vacation resorts might provide inspiration.
2. Online delivery must be world-class
Costco, Walmart, Nordstrom and others have invested heavily in ensuring that their online involvement is well resourced and competitive with the best that Amazon can offer (their success is one reason that Amazon has begun advertising itself in traditional media10). For most universities the reach and scalability of online is attractive but they will be competing against the rest of the world. Only the very best quality delivery of market relevant courses with full academic commitment and outstanding user experiences will stand the test of time.
3. Pace, performance and personalisation
Retailers have optimized supply chains and utilized technology to ensure that product is always available, personalisation is possible, delivery never disappoints, and repeat business is maximised. For universities excellence must extend from the first point of contact to the building of alumni networks and lifelong learning. If a programme of study or administrative process is not competitive, a disciplined university will recognise the problem quickly and adjust it or eliminate it.
4. One size does not fit all
Sears declined from being the largest retailer in the US in 1989 to near bankruptcy in 2018, but Dollar General, 7-11, Aldi and O’Reilly Auto are among those opening stores. Value, convenience and specialisation have given them growth opportunities in the market. It’s a reasonable reminder that there are millions of students around the world with differing needs and resources. Universities should actively focus on understanding the market, seek differentiation and develop their niche.
Perhaps the best rallying call from retailing is what Deloitte has termed ‘the great retail bifurcation’11 with growth for ‘price’ and ‘premium’ performers contrasting with ‘balanced’ retailers, who have broadly similar offerings, lagging behind; they suggest that the moment is ripe for a modern renaissance which uproots traditions, institutions and thoughts. More starkly they comment on the need for ‘new and unique capabilities’ and reflect the degree to which the ‘new requirements differ from the old operating model’.
All told, however, the most significant and radical change needed may be an unravelling of the emotional commitment to delivery and outcomes which remain organised around a model first established in the 11th century. The large fixed-cost base of buildings and grounds have also come to be seen as more central to the identity of most universities than meeting the needs of their students. There is a pressing need to focus hard on the needs and expectations of the customer and consider new models and concepts. Looking outside the sector for inspiration may help.
References
- Sometimes the Best Ideas Come from Outside Your Industry, Poetz, Franke and Schreier, Harvard Business Review, November 21, 2014
- ‘The United States Country Report: Trends in Higher Education from Massification to Post- Massification’, Gompert, Iannozzi, Shaman and Zemsky, National Center for Postsecondary Improvement, Stanford, 1997)
- Multinationals and Global Capitalism: From the Nineteenth to the Twenty-first Century, Geoffrey G. Jones, Oxford University Press, 2005).
- 2017 just set the all-time record for store closings, CNN Business, October 25, 2017
- Quote by Clayton Christensen, from Inside Higher Education, November 21, 2017
- Debunking the Retail Apocalypse, Holman and Buzek, IHL Group, August, 2017
- Global Powers of Retailing 2015 Embracing Innovation, Deloitte Touche Tohmatsu Limited, 2015
- Carma Elliot OBE, Director China British Council, quoted in The Pie, December 19, 2018
- Retail’s Radical Transformation/Real Opportunities Beyond the “Retail Apocalypse” to a Bright Future, Holman and Buzek, IHL Group, August, 2018
- Jeff Bezos used to hate spending money on ads, Eugene Kim, CNBC, February 1, 2019
- The Great Retail Bifurcation, Why the retail ‘apocalypse’ is really a renaissance, Deloitte Insights, Deloitte Development LLC, 2018