Ron Johnson had the right idea with JC Penney. Focus on the store environment and engage customers while they are in the store and money will follow. Only catch – you have to get customers into the store first. Unfortunately for JC Penney, what drove a large part of its core shoppers to the store was a coupon in the mail and when that dried up – so did the store traffic.
Google is known for its April fool humor. One of my favorites is this one that promises to “teleport you directly to a business location by clicking on its search ad”. Now if only it were that simple to get a consumer to the store. Let’s face it – it takes real effort on part of the consumer to get off the couch and decide “I am going to go shop at xyz store …”. It needs a compelling “why” and lacking that, they are just as likely to not go to a store or go to the one that gives them that compelling reason.
So how can retailers think about what is it that drives consumers to their store? I believe it is the answer to this question “if my store didn’t exist tomorrow – will it be missed? Why?” Mind you it’s not the same as describing your “value prop” or “brand promise” – these concepts are often laden with such marketing jargon that they inhibit an honest introspection of the true value that your business provides. Also a “value prop” or “brand promise” touches upon ALL the things that you do for your consumer, while the answer to the above question is what is that ONE thing that you do really well.
From a consumer’s perspective, the reason they visit your store and the answer to this question is likely going to involve one of the 3 key dimensions: Price, Convenience, or Merchandising Authority. While a retailer can be known for more than one of these things – on one of these dimensions they truly must excel and work day and night to preserve that. This is not to say they can ignore the other two – they still must provide an acceptable level of satisfaction on the other dimensions (or in many cases more than acceptable to make it a differentiator). But in a customer’s mind you have to be a leader in one of these dimensions to warrant a visit to your store. If you do not have a spike on any of these – well that’s when you have to fallback to coupons and promotions as the primary means to drive that next visit.
Price, Convenience, Merchandising Authority – let’s take a closer look.
- Price Authority – When I need to be confident that I am most likely paying the lowest price I could – where do I go? In the US market, Walmart, Costco and Amazon are some of the names that immediately come to mind. Not surprisingly, because these retailers work hard to preserve that price image. At a Global Retailing Conference , I recently attended – Jim Sinegal, founder and former CEO of Costco, described how Costco stopped carrying sugar in a certain market because other retailers in that area were pricing sugar as a loss leader. He said something to the effect “If a customer didn’t see that we had the lowest price on sugar – they would be absolutely right in concluding that we possibly didn’t have the lowest price on anything”. There was no way Costco could risk diluting their price perception. Again, to be clear Costco also has excellent merchandise and they also have excellent customer service. Collectively, they make for a great customer experience, but I think the primary driver of many of their store visits is their pricing authority.
- Convenience Authority – When I go to Target, I know I am going to pay a little extra compared to Walmart. Sure, Target’s merchandise is great – but even when I seek an item that I know I will find at both places – and despite the fact Walmart is closer to my home than Target is, more often than not Target wins my business. Why? Their prices are not the lowest. Their merchandise in most cases is not unique. It’s the convenient and a no-hassle shopping experience that is a driver of lots of their store traffic.
- Merchandising Authority – I know I will miss “Sports Authority” if it were to close. I know that even on sale prices, I am likely to pay more than I would at many other places. But I also know that I will get what I need/want for sports/fitness. Ok – so this is easier done for specialty stores. But the “merchandising” dimension is equally applicable for many other types of retail especially in lifestyle categories like apparel, home, and food. At the Global Retailing Conference, Bonnie Brooks, President and CEO of Canadian retailer “The Bay” (department store arm of Hudson Bay Company) talked about their recent transformation. They were in a JC Penney like promotional spiral – but the reason they were able to get out of that was by re-establishing their “fashion authority” – by becoming the destination where people came looking for the brands and fashions they wanted.
So what about this thing called Customer Experience? (see Mohamed Amer’s blog or Lori Mitchell-Keller’s blog on the topic). Could people come to your store just for the experience? At the Global Retailing Conference there were many great examples of fine retailers excelling in customer experience. “Retail is theater” declared Bloomingdale’s COO Tony Spring. Example was given of lululemon – how “community building” is a big part of their focus. Joseph Bona of CBX stressed how a physical store needs to evolve to catch all of our senses to be relevant. I think these are all valid thoughts. That is where a physical store needs to go – and it will get there – and if you are starting a new retail business you have a fresh slate to define something unique. But if you are a retailer that has been around, you cannot build a great customer experience by diluting whatever it is that gets people to your store (well not unless you have a really long term time horizon to change your customer’s habits and perceptions). You first and foremost need to seriously examine “what will people miss about you” and guard it witheverything you have got.
While you are at it, do not forget the role technology plays in helping you defend or enhance whatever makes your business unique. Pricing authority is really hard to defend if you are not up-to-minute on the prices that your customer is checking on her phone. Merchandising Authority could quickly turn into a disappointed customer if you do not have the right product in stock. Convenience Authority can be enhanced many-fold if you know your customer comprehensively and personally in real-time. SAP SAPPHIRE is around the corner and a great chance to see some of our latest innovations that can help a retailer be the best that it can be.