May 9, 2008
Looking Back/Looking Ahead: Retailers Pick Areas in Which to Excel
What follows is the first in a series that present a chance to reconsider topics from past RetailWire discussions.
It was this week in 2006 when RetailWire posted a story and discussion on a then new study by AlixPartners that concluded, rightly so, that retailers cannot be all things to all people. The study confirmed that, instead, retailers should concentrate on owning one or two of the five key criteria that consumers have when evaluating a store.
The five items identified by AlixPartners at the time were: price, product, service, access and overall shopping experience.
Fred Crawford, a managing director at AlixPartners’ office in New York and co-author of The Myth of Excellence with RetailWire BrainTrust member Ryan Mathews, told MarketWatch at the time, “If you’re spreading precious assets, peanut-butter style, evenly across all five attributes, you’re either wasting money or, worse, condemning all five to mediocrity.”
He offered Wal-Mart as a retailer that excels on a few measures important to its customers. “People might not enjoy shopping at Wal-Mart, but they can get so many things done there, they tolerate it,” he said. “Love them or hate them, Wal-Mart really dominates the consumer psychology.”
RetailWire BrainTrust panelist George Whalin, President & CEO, Retail Management Consultants, submitted a counterpoint.
“The idea that ‘in many respects, Wal-Mart defines retail in America’ would be a sad statement about the retail industry…if it were true!,” wrote Mr. Whalin. “Fortunately there are a good many other retailers in America who place a very high value on the retail attributes of price, product, service, access and overall shopping experience that were the cornerstones of this study. Their customers recognize and appreciate the focus these retailers place on these attributes.”
Some panelists keyed in on other operators and differentiating strategies.
“While they certainly aren’t hidden from the press, Starbucks and Chico’s have mastered the art of excelling in a few areas to drive business results,” wrote Gene Hoffman, President, Corporate Strategies International, “And they have accomplished it by converting a commodity (coffee) into a “social fashion” and by selecting and sizing women’s clothes in a process that soothes the targeted female shopper.”
“Certainly J.C.Penney is doing an excellent job of being a clothing department store, including mail order and e-commerce,” offered Mark Lilien, Consultant, Retail Technology Group. “They decided it wasn’t worth losing money in many hard goods categories and discontinued them. They decided to avoid brand name price wars so they depend on their private labels.
“Trader Joe’s decided to specialize in the unusual, creating more and more meaningful exclusives, ignoring the price war attractions (commodities and brand names everyone else carries). Dominance is less likely the more territory a retailer tries to conquer (more categories, more price points, a wider audience). And successful private label leads to a virtuous circle of better margins, better profits, and increased customer loyalty.”
Discussion Questions: Of the key points of evaluation defined by AlixPartners (access, price, product, shopping experience or service), which do you think is most important to the largest group of consumers in today’s environment? Two years hence, are there now any other points of evaluation that you think need to be added or removed from the list? What retailers do you the best exemplify the lessons in the AlixPartners’ research?
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I like the addition Vahe suggests, and would add one more–Value. I know value is implicit in some of the other attributes listed, and is a lot more subjective, but it’s still a valid point of differentiation.
As for retailers that are best exemplifying the lessons on the list, there are certainly several independents (10 stores or less) in most verticals that qualify (Pardon my preference for metro NYC companies). In grocery, there’s Stew Leonard’s. In consumer electronics, there’s J&R. No relation, but JR Cigar is an excellent tobacco products retailer, as is Nat Sherman. I could list furniture stores (Greenbaum’s & Lloyd’s), fashion retailers (Century 21) and many more, and I’m sure the readers of this column can too. My point is that many smaller retailers are driving progress in each of these attributes, so we should all be looking at the independents for innovation as well as chains.
The key word in this discussion is “tolerate.” We’ll overlook the bad things in your store if you have the goods we want, and let us get out of the store without an issue.
Shopping is a painful experience for many consumers. The subconscious decisions made by consumers adding up their basket as they go make them very tense. A painless and swift checkout leaves a good feeling with the shopper, regardless of how much they spent, or over-spent.
Price is an obvious choice in this question, but I have to argue for access. How many times do you drive past an outlet that has exactly what you need to get to some place else that is cheaper? Especially with today’s gas prices.
Convenient location and access rule consumer behavior. That is why Wal-Mart still gets a significant portion of shopper’s “Quick Trips”–they are quicker because they are the closest outlet at hand at the time.
Who’s the world’s largest food retailer? Wal-Mart. So rack up the importance of price. Who is the most unique new food retailer? Possibly Whole Foods at the moment. So rack up uniqueness, even at a higher price. Who are the best food merchandisers? Well, I like Wegmans and Kroger too. Who has the best product reputation? Is it Coach?
Then consider these other “bests”. Who has the best Sense of Theater? Who consistently offers the best shopping experience? Who creates the most satisfaction for baby boomers … and also for senior citizens? Bottom line: Pick your niche and go for it in a convincing manner that you serve your selected customers better than anyone else could ever serve them.
I believe each of the attributes described are important to the customer but as the research says, you can’t be all those things. This is particularly true as other retailers are looking to ‘pick-off’ their competition with one element at which they can be superior–and rightly so–that is the basis of competitive brand marketing.
But it is a brave company who can have the guts to endeavor to capture only a handful of strategic positioning points. Too many companies are still trying to cover all the bases–seemingly unsuccessfully.
The best example of a retailer who did that recently, was CompUSA. There were multiple strategies, and constantly changing. They added and removed merchandise categories regularly, so much so that the consumer didn’t know what they stood for anymore.
Other consumer electronics retailers should be careful not to fall into that same trap.
Unfortunately, price is still king in the US, even though quality has made great strides thanks to the likes of Whole Foods and Apple. It could be that Americans are just hard-wired to look for the best price, or, we’ve been in stagnation so long on the wages front that consumers simply have no choice.
Having said that, with more pervasive use of the internet due to rising transportation costs and increased broad band use, ALL components of the customer experience are going to deserve more attention. Consumers can easily search for the best, for the best price…so, no longer will merchants be able to provide cheap, low quality substitutes when their customers can find the best price for the real deal in just seconds.
And, with more internet shopping and fewer stores, the store experience needs to make a quantum leap. This is the area, in our opinion, that needs the most work. We are so far from the experiences described in the study, it makes you wonder if we’ll ever get there (think: sea of slat-wall).
First to market with a better store experience will win. Leaders now are Coach, Apple, A&F, Anthropologie, Nordstrom, Whole Foods and Nau. But we’ve got a long, long way to go.
Two years ago a lot of analysts and others were slamming Wal-Mart for having lost its way trying to go upscale. Today, with consumers seeking to cut costs any way they can, the company is suddenly a retailing genius again.
It’s not about choosing a single attribute; a retailer is a blend of attributes and the choices of the blend vary by target customers and merchandise sold. To be sure, knowing your audience will drive the decisions around the attribute mix.
How about adding another attribute that customers seem to care about, namely: information. Information produced by other shoppers, the user generated stuff that drives folks to Google and Amazon reviews as their first stop. Information may be a subhead in the list but it deserves to be a separate attribute in the coming years–that’s my suggestion for new discussion threads.
Retail is not a formula comprised of a few intellectually-defined categories. Well, it IS for MBAs and consultants who believe that merchant success comes from a book. But for the truly successful retailers in history, there is an additional, difficult-to-define component that is the most important of all.
I hate reality TV shows except for one, Top Chef on the Bravo channel. Perhaps it’s because of Padma Lakshmi, the host (chef, supermodel, actress, and Salman Rushdie’s ex). Anyhow, the ongoing theme of the show is “flavor,” and that’s the missing component from MBA studies and consultant marketing plans. In retail, “flavor” is a recipe of personality, mystery, surprise, entertainment, charisma, and lagniappe. And probably some other stuff. That’s why it’s indefinable. However, as Supreme Court Justice Potter Stewart famously wrote in ’64 regarding obscenity in the movie bidness, “I know it when I see it.” And by that criteria ye shall know “flavor.”
It’s rather interesting that access and price remain the key drivers, both in the eyes of the consumer and the retailer c-suite, yet just today we see a story showing how Wal-Mart is backing off plans to open more stores in urban areas (specifically Chicago). It seems that retailers and consultants for years have been “talking the talk” about the urban opportunity being the final frontier, yet we can’t seem to make any headway as an industry to “walk the walk.”
If there was ever a subset of the population that would drive the focus on price and easier/better access, consumers in densely populated urban areas would likely be leading the discussion. But if the Chicago market story about Wal-Mart’s struggles is any indication, it’s going to take a committed effort from both retailers and political leaders to find a way/make a way for this to become reality.
Doing the “right thing” for the people shouldn’t perpetually be viewed as “not in our best interest” from a financial and political agenda perspective. There’s likely a “way” to get this done, the question is whether we’ll ever show the “will….”
And it’s critical to identify what to give up. IKEA decided access (being convenient to everyone) isn’t critical. Building 19 decided customer service and consistent assortments weren’t worthwhile goals. Price isn’t on Mercedes’ radar screen (or 7-Eleven’s, either.) No warehouse store has a complete product assortment or complete set of sizes or brands for the products they do carry.
And sometimes the lowest price with a great assortment and convenient locations is still a weak combination. Bookstores are big business, yet every town has a free library, most with a nice assortment.
Asking which of the the five attributes is most important to today’s shoppers is like asking me which of my kids I like best. They all have their moments.
Yes, as noted by many above, price matters a lot, especially in today’s economic uncertainty. But, access is still the #1 reason consumers change destination outlets. And without the right products, the whole trip is useless. Experience and service are what set the growth players apart.
Winners must demonstrate they are “right” across all five attributes to win loyalty from tomorrow’s shoppers.
Asking: “Which of the key points of evaluation…is most important to the largest group of consumers in today’s environment?” is the wrong question. Consumers are segmenting their needs–selecting what is important and when it is important. Certainly, quality consumable products at low price is the largest segment. To the disdain of many retailers and consultants, Wal-Mart wins that one.
Apply a little of Maslow’s Hierarchy of Needs to the issue. Most shoppers are not seeking self-actualization when buying a package of Ball Park Franks or a box of Tide. They are addressing hunger and other needs lower on the pyramid. They are quite rational. I did some comparison-shopping last week between my close, well-operated grocery store and the distant Wal-Mart Supercenter. The smallest price difference I found between the two like items was 17%. One comparison item was over 30%. There is a niche of consumers willing to pay for the ‘experience’ of upscale lighting and music while picking up a roll of Bounty for twenty-percent more, but it is a niche.
Consumers are seeking to satisfy different needs when shopping for fashion or jewelry or when shopping at Whole Foods. Wal-Mart and Whole Foods both took segmenting to heart and played to their audience and both are succeeding.
I guess not much has changed in two years as the discussion still centers on Wal-Mart and everyone else. Beyond selling strategies, retailers need to better define their overall value proposition in today’s competitive marketplace.
The strong retail economy over the past two decades was keeping most boats afloat. However, now that the industry is over-saturated with stores and more niche players are emerging online, the margin for error is going to be extremely slim and selling strategies well defined. Ultimately, customers are going to be more selective and those merchants that can get back to a differentiated experience will prevail.
This question runs the gamut of the spectrum of retailing. Price at one point and shopping experience and service at the other. At face value this is a simple question, however retailing is a complex and intricate endeavor.
Certainly in the broadest outlook, for the largest number of US customers, Price IS the number one important quality by far and, of course, Wal-Mart owns this. This is the immediate answer to this question.
Let us not however be disrespectful to all the higher end merchants working so diligently to provide excellent service and shopping experience for their much smaller segment of the population and also the hard working and tortured middle level merchants who continue against surmounting odds to fight, and to find a model which keeps them relevant and necessary to a large number of customers, many of whom are economically forced to trend downward.
Not that providing the lowest price is easy either. I have no doubt that the Wal-Mart executives strive to create a better experience and environment in which to buy sliced deli ham, Tide, pineapple, light bulbs, and a quart of semi-gloss paint, even though their efforts are not seemingly successful.
I guess like others, I want to express the importance of all of these attributes. The bottom line in my opinion however is that Price is the factor that wins and is ultimately most important.
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I like the addition Vahe suggests, and would add one more–Value. I know value is implicit in some of the other attributes listed, and is a lot more subjective, but it’s still a valid point of differentiation.
As for retailers that are best exemplifying the lessons on the list, there are certainly several independents (10 stores or less) in most verticals that qualify (Pardon my preference for metro NYC companies). In grocery, there’s Stew Leonard’s. In consumer electronics, there’s J&R. No relation, but JR Cigar is an excellent tobacco products retailer, as is Nat Sherman. I could list furniture stores (Greenbaum’s & Lloyd’s), fashion retailers (Century 21) and many more, and I’m sure the readers of this column can too. My point is that many smaller retailers are driving progress in each of these attributes, so we should all be looking at the independents for innovation as well as chains.
The key word in this discussion is “tolerate.” We’ll overlook the bad things in your store if you have the goods we want, and let us get out of the store without an issue.
Shopping is a painful experience for many consumers. The subconscious decisions made by consumers adding up their basket as they go make them very tense. A painless and swift checkout leaves a good feeling with the shopper, regardless of how much they spent, or over-spent.
Price is an obvious choice in this question, but I have to argue for access. How many times do you drive past an outlet that has exactly what you need to get to some place else that is cheaper? Especially with today’s gas prices.
Convenient location and access rule consumer behavior. That is why Wal-Mart still gets a significant portion of shopper’s “Quick Trips”–they are quicker because they are the closest outlet at hand at the time.
Who’s the world’s largest food retailer? Wal-Mart. So rack up the importance of price. Who is the most unique new food retailer? Possibly Whole Foods at the moment. So rack up uniqueness, even at a higher price. Who are the best food merchandisers? Well, I like Wegmans and Kroger too. Who has the best product reputation? Is it Coach?
Then consider these other “bests”. Who has the best Sense of Theater? Who consistently offers the best shopping experience? Who creates the most satisfaction for baby boomers … and also for senior citizens? Bottom line: Pick your niche and go for it in a convincing manner that you serve your selected customers better than anyone else could ever serve them.
I believe each of the attributes described are important to the customer but as the research says, you can’t be all those things. This is particularly true as other retailers are looking to ‘pick-off’ their competition with one element at which they can be superior–and rightly so–that is the basis of competitive brand marketing.
But it is a brave company who can have the guts to endeavor to capture only a handful of strategic positioning points. Too many companies are still trying to cover all the bases–seemingly unsuccessfully.
The best example of a retailer who did that recently, was CompUSA. There were multiple strategies, and constantly changing. They added and removed merchandise categories regularly, so much so that the consumer didn’t know what they stood for anymore.
Other consumer electronics retailers should be careful not to fall into that same trap.
Unfortunately, price is still king in the US, even though quality has made great strides thanks to the likes of Whole Foods and Apple. It could be that Americans are just hard-wired to look for the best price, or, we’ve been in stagnation so long on the wages front that consumers simply have no choice.
Having said that, with more pervasive use of the internet due to rising transportation costs and increased broad band use, ALL components of the customer experience are going to deserve more attention. Consumers can easily search for the best, for the best price…so, no longer will merchants be able to provide cheap, low quality substitutes when their customers can find the best price for the real deal in just seconds.
And, with more internet shopping and fewer stores, the store experience needs to make a quantum leap. This is the area, in our opinion, that needs the most work. We are so far from the experiences described in the study, it makes you wonder if we’ll ever get there (think: sea of slat-wall).
First to market with a better store experience will win. Leaders now are Coach, Apple, A&F, Anthropologie, Nordstrom, Whole Foods and Nau. But we’ve got a long, long way to go.
Two years ago a lot of analysts and others were slamming Wal-Mart for having lost its way trying to go upscale. Today, with consumers seeking to cut costs any way they can, the company is suddenly a retailing genius again.
It’s not about choosing a single attribute; a retailer is a blend of attributes and the choices of the blend vary by target customers and merchandise sold. To be sure, knowing your audience will drive the decisions around the attribute mix.
How about adding another attribute that customers seem to care about, namely: information. Information produced by other shoppers, the user generated stuff that drives folks to Google and Amazon reviews as their first stop. Information may be a subhead in the list but it deserves to be a separate attribute in the coming years–that’s my suggestion for new discussion threads.
Retail is not a formula comprised of a few intellectually-defined categories. Well, it IS for MBAs and consultants who believe that merchant success comes from a book. But for the truly successful retailers in history, there is an additional, difficult-to-define component that is the most important of all.
I hate reality TV shows except for one, Top Chef on the Bravo channel. Perhaps it’s because of Padma Lakshmi, the host (chef, supermodel, actress, and Salman Rushdie’s ex). Anyhow, the ongoing theme of the show is “flavor,” and that’s the missing component from MBA studies and consultant marketing plans. In retail, “flavor” is a recipe of personality, mystery, surprise, entertainment, charisma, and lagniappe. And probably some other stuff. That’s why it’s indefinable. However, as Supreme Court Justice Potter Stewart famously wrote in ’64 regarding obscenity in the movie bidness, “I know it when I see it.” And by that criteria ye shall know “flavor.”
It’s rather interesting that access and price remain the key drivers, both in the eyes of the consumer and the retailer c-suite, yet just today we see a story showing how Wal-Mart is backing off plans to open more stores in urban areas (specifically Chicago). It seems that retailers and consultants for years have been “talking the talk” about the urban opportunity being the final frontier, yet we can’t seem to make any headway as an industry to “walk the walk.”
If there was ever a subset of the population that would drive the focus on price and easier/better access, consumers in densely populated urban areas would likely be leading the discussion. But if the Chicago market story about Wal-Mart’s struggles is any indication, it’s going to take a committed effort from both retailers and political leaders to find a way/make a way for this to become reality.
Doing the “right thing” for the people shouldn’t perpetually be viewed as “not in our best interest” from a financial and political agenda perspective. There’s likely a “way” to get this done, the question is whether we’ll ever show the “will….”
And it’s critical to identify what to give up. IKEA decided access (being convenient to everyone) isn’t critical. Building 19 decided customer service and consistent assortments weren’t worthwhile goals. Price isn’t on Mercedes’ radar screen (or 7-Eleven’s, either.) No warehouse store has a complete product assortment or complete set of sizes or brands for the products they do carry.
And sometimes the lowest price with a great assortment and convenient locations is still a weak combination. Bookstores are big business, yet every town has a free library, most with a nice assortment.
Asking which of the the five attributes is most important to today’s shoppers is like asking me which of my kids I like best. They all have their moments.
Yes, as noted by many above, price matters a lot, especially in today’s economic uncertainty. But, access is still the #1 reason consumers change destination outlets. And without the right products, the whole trip is useless. Experience and service are what set the growth players apart.
Winners must demonstrate they are “right” across all five attributes to win loyalty from tomorrow’s shoppers.
Asking: “Which of the key points of evaluation…is most important to the largest group of consumers in today’s environment?” is the wrong question. Consumers are segmenting their needs–selecting what is important and when it is important. Certainly, quality consumable products at low price is the largest segment. To the disdain of many retailers and consultants, Wal-Mart wins that one.
Apply a little of Maslow’s Hierarchy of Needs to the issue. Most shoppers are not seeking self-actualization when buying a package of Ball Park Franks or a box of Tide. They are addressing hunger and other needs lower on the pyramid. They are quite rational. I did some comparison-shopping last week between my close, well-operated grocery store and the distant Wal-Mart Supercenter. The smallest price difference I found between the two like items was 17%. One comparison item was over 30%. There is a niche of consumers willing to pay for the ‘experience’ of upscale lighting and music while picking up a roll of Bounty for twenty-percent more, but it is a niche.
Consumers are seeking to satisfy different needs when shopping for fashion or jewelry or when shopping at Whole Foods. Wal-Mart and Whole Foods both took segmenting to heart and played to their audience and both are succeeding.
I guess not much has changed in two years as the discussion still centers on Wal-Mart and everyone else. Beyond selling strategies, retailers need to better define their overall value proposition in today’s competitive marketplace.
The strong retail economy over the past two decades was keeping most boats afloat. However, now that the industry is over-saturated with stores and more niche players are emerging online, the margin for error is going to be extremely slim and selling strategies well defined. Ultimately, customers are going to be more selective and those merchants that can get back to a differentiated experience will prevail.
This question runs the gamut of the spectrum of retailing. Price at one point and shopping experience and service at the other. At face value this is a simple question, however retailing is a complex and intricate endeavor.
Certainly in the broadest outlook, for the largest number of US customers, Price IS the number one important quality by far and, of course, Wal-Mart owns this. This is the immediate answer to this question.
Let us not however be disrespectful to all the higher end merchants working so diligently to provide excellent service and shopping experience for their much smaller segment of the population and also the hard working and tortured middle level merchants who continue against surmounting odds to fight, and to find a model which keeps them relevant and necessary to a large number of customers, many of whom are economically forced to trend downward.
Not that providing the lowest price is easy either. I have no doubt that the Wal-Mart executives strive to create a better experience and environment in which to buy sliced deli ham, Tide, pineapple, light bulbs, and a quart of semi-gloss paint, even though their efforts are not seemingly successful.
I guess like others, I want to express the importance of all of these attributes. The bottom line in my opinion however is that Price is the factor that wins and is ultimately most important.