Redefining Retail Excellence from product-centric to customer-centric

8/9/2019 Redefining Retail Excellence from product-centric to customer-centric

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Redefining Retail Excellence from product-centric to customer-centric

Introduction

I was recently walking the malls doing market research for a new leather accessories

brand and visited nearly thirty stores in the course of a single day. A thought occurred tome. Just imagine walking into a mall with store names removed. Retail stores arebecoming more and more alike. Similarities abound not only in assortments (or lack

thereof), presentation, and even in-store customer experience. As customers we have all

experienced a tepid sameness.

So what is excellence in retail in such a monotonous environment? This question elicits

different responses from customers and retailers. Customers respond to this question by

identifying where they would prefer to shop based upon previous memorable (or hassle-free) shopping experiences, and define excellence as availability of desired merchandise

at fair prices at convenient locations. Whereas retailers reiterate the five rights of

merchandising having the right merchandise at the right price, at the right time, inthe right quantities, and at the right place, and achieving targeted returns for the

owners.

Does the retailer perspective match the customer view? It doesnt seem so based uponexperience. Retailers in the region are product-centric, and feel that their job ends by

selecting what they feel is the right merchandise. Whereas we as customers are looking

for shops sensitive to our needs or are customer-centric. Think of your favorite store andwhat draws you to it. The stores we like are the stores where we are engaged (more on

this later) from the time we cross the threshold to the time we leave, whether we make apurchase or not. And the stores we dislike are the stores where we experience apathy and

unresponsiveness to our needs over the entire visit. Engagement for a customer is much

more than recognition and eye contact. Shopping is like an expedition to fulfill a need,and has two distinct phases the process of buying (search, evaluation, and purchase),

and the post-purchase experience based upon actual possession of the product.

Everything that occurs in a shop and eases the process of buying becomes a pleasantcustomer experience. And what if we are unable to find what we are looking for? It is not

often that we encounter a store salesperson that helps us, who possesses adequate product

knowledge, makes an effort to understand our needs, identify alternative options, and

practice add-on selling, making shopping hard work. The post-purchase feeling ofpossession is also influenced by a sense of achievement of the expedition, of having got

greater value than the price paid, a process to a great degree influenced by the in-shop

buying processes. Contrast the regional experience with visits to the same brand stores inEurope and the USA, visits which are often more fruitful in terms of product availability

and more pleasant shopping experiences.

Another dimension of our markets was highlighted when a faculty member from a world-

famous business school visited the region. He observed that the marketing

communication of most retailers seemed to be over-emphasizing price, with a somewhatlesser emphasis on other elements of the retail mix like width and depth of merchandise,


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What needs to be done redefine customer value

One needs to get back to basics. Retailers exist as an intermediary between franchisor andcustomers, and have traditionally approached their business with a mercantile, deferential

and compliant mind-set in front of the franchisors. They have placed a limited emphasisupon adding value to the product through domestic organizational capabilities. Increasedvolume of sales will now require retailers develop a more activist approach of using all

the elements of the retail-mix (merchandise, customer experience, retail format, location,

and communication) to identify and explain (position) the store to customers. It will be

necessary, within the constraints of the franchise relationship, to pull back the initiativeback from the franchisor. This shift in bargaining power is possible since the retailer

understands the customers, their needs and shopping behaviors better than the

franchisors. And the actual service delivery is often something the franchisor will not do.

So how does the retailer enhance service delivery? A consumer perception of value is the

benefits derived through the purchase less the burdens endured while purchasing. Thebenefits derived from a retail brand consists of two components the value derived from

the brand itself (that which will be available anywhere where the brand is sold), and the

benefits and services provided by the store. The latter consists of quality merchandise,

caring personal service, pleasant store atmosphere, convenience and peace of mind (post-purchase evaluation). Whereas the burdens are the direct explicit costs (or price), and

indirect costs like store employees with inadequate product knowledge, slow check-out,

out-of-stock situations, sloppy and poorly merchandised stores. The retailer providesdiscernible value through saving time by offering the correct mix of products at a

convenient location, efficient completion of transactions, access to proper assortment toprevent visit to another location, etc. Retailers have traditionally focused upon brand-

based differentiation (i.e. brand or product category not available elsewhere), or a price-

leadership approach (i.e. same brands at a lower price). But only to a lesser degree aservice or personality augmentation (i.e. specific services and personality to distinguish a

store based upon customer experience). Price is price but value is total experience. The

tragedy of the Gulf is that since the customer service is generally poor and merchandiselooks the same from store to store, then customers seek the lowest price. But if retailers

offer customers a fulfilling experience a strong competitive advantage can be developed

through loyalty. It needs to be borne in mind that service works only if the store has

correct merchandise.

A properly chosen and executed position (identity / image) in the minds of consumers

will be the most important competitive tool in tomorrows competitive retailenvironment. The linchpin of such a strategy will be products augmented through service

for a targeted audience. This is very different from the present where retailers are often

dependent upon suppliers for product assortment, product selection and merchandisingrecommendations.

Positioning guidelines


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The consumers concern for value doesnt mean that they wont ever pay prices that allowretailer high margins for products augmented with service. Even for low margin

functional goods like groceries it is possible to identify customer segments interested in

specific augmentation for specific types of products e.g. Goodies in Wafi or the need of acomplete traveling solutions store in a region where 60-70% residents travel. For high

margin functional goods retailers will need to offer unique merchandise its customerswant with distinctive services and personality for its target audience e.g. Godiva, Bateel,in-store battery change service in The Watch House (vs. Rivoli where even a battery

change requires a drop-off). The best high margin opportunity will be in specialty stores

in the new and emerging merchandise categories e.g. exclusive shirt stores. Contrast this

with positioning that may cease to be relevant like multi-brand retailers like GrandStores, Salams, Jashanmals, etc. need to think in terms of positioning their businesses

rather than stores. Large multi-line stores do not offer a consistency of image across

businesses in order to have customer appeal (particularly in an economy where thecustomers are pre-dominantly transient and a large proportion of the population is new).

Presented hereunder are ideas to develop a distinctive positioning in the eyes ofcustomers.

Idea How

Develop a distinctive assortment based on style, size

and color

Positioning 101

Carry a percentage of experimental (products that

you may not have purchased based upon

experience) products.

Experiment with new and innovative products for

customer feedback.

Offer frequent change of merchandise Keep customer expectations alive through launches

every month (e.g. Zara, Mexx, etc.).

Offer distinctive merchandise For distinctive image (e.g. Tavola household

products with the design element, Braun home

appliances, The Living Zone, etc.)Private brands with discernible quality For example introduction of high-quality linen as a

home brand.

Product and product-line innovation when what

are perceived as loosely coherent product categories

can be developed into a cohesive specialty store

For example the region is ready for a Crate & Barrel

or a Williams-Sonoma type of offering.

Edit assortments to cater to a particular segment For example Liz Claiborne or Gerry Weber etc.

Coordinate merchandise for a specific need. For example TableArt (soon to be launched) Rivoli

boutique to offer all items to coordinate a table

Narrow specialized product-line small selection of

high price / high quality brands

For example high-end watches, jewelry, etc.

The category killer approach offering the widest

possible selection of every category stocked

For example a Shoe City or Shoe Mart.

Offer merchandise tailored to a particular customer The survival strategies for the local supermarketse.g. category assortment suited for the local

clientele or the gas station store for the hurried

shopper.

The hyper market approach narrow range and

wide variety

A Carrefour or a Lu Lu Center

Large assortment in limited categories It is impossible to do comparison shopping in the

domestic electronics business (except at Jackys).

Plug Ins attempted to be a destination store but is


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still influenced by inadequate brands in key

categories like TVs, appliances, etc.

Whatever positioning is attempted needs to be tested against five key criteria for it to be

meaningful from the customers point of view is the assortment dominant (can

customers identify with it for meeting their needs), is the pricing fair, is the service at thestore based upon a philosophy of respect for customers, and does the shopping layout,

store signage, and customer service focused upon saving customer time and energy.

Conclusion

The key to success in retail in the next few years will be store differentiation in the mindsof customers. The top two or three stores that will be top of mind when a customer need

is triggered will be the winners in an over-retailed environment. To achieve this retailers

will need to focus upon developing organizational capabilities of differentiating their

stores to achieve store loyalty by giving customers what the want. They will need to startby making a strong statement in their merchandise category, and then make themselves

different in a visual and experiential way in the minds of the consumers through service

delivery, a process that will require a paradigm shift in the human resource managementpractices in the region.

Manoj Nakra 2005

Redefining Retail Excellence from product-centric to customer-centric

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