One of the toughest managerial jobs these days is in retail, whether you’re running an individual store, chain, mall or online purveyor of goods. People are buying, but the context has changed dramatically thanks to the internet.
Even greater change may be coming.
Consultants Bobby Gibbs and Nick Harrison suggest in Harvard Business Review that, just as giant travel search engines such as TripAdvisor, Expedia, Kayak and Google Flights have undercut travel agents, the next evolution of retail will see the emergence of refined technologies. Algorithms will tailor recommendations, then hunt the internet for the best deal.
Clarity may be sharpened by the matrix that Wharton School marketing professor Barbara Kahn offered in her recent book, The Shopping Revolution.
The horizontal axis in her matrix illuminates the crucial retail proposition of strong product benefits and pleasing customer experience. The vertical axis, superior customer advantage, reflects the fact that for a company to win customers it must offer products and experience that are better than the competitors.
That duality is not novel. But it’s also clear for strategists and produces four quadrants they can choose to operate in:
- Product brand: Here, branded performance superiority is the essence. Examples include footwear firm Nike, retailer Saks Fifth Avenue, and eyeglass firm Warby Parker. It’s about confidence.
- Experiential: The customer experience is exceptional. Beauty-care firm Sephora and Eataly, a cornucopia of Italian restaurants and food products, are examples. Shoppers can count on fun.
- Low Cost: Walmart and Costco aim for operational excellence that through efficiencies will yield low prices. The essence: savings.
- Frictionless: Amazon makes your buying comfortable. In one word, easy.
But these days dominance in one square is apparently not enough. You need to aim for two dimensions, Prof. Kahn says.
For example, Amazon’s burst to prominence was based on offering online convenience. Now it’s also pursuing a low-cost advantage. Walmart, the low-cost exemplar for decades, is now trying to provide online convenience. Warby Parker offered hip, branded eyeware to millennials but is now also trying to excel on price.
Retail can be a world of contradictions and innovation. Expert Greg Satell captured an important one when he wrote in his blog: “It seems that in a digital world, physical stores have become a thing of the past. Yet if that were true, why are Apple, Amazon and now even the Coca-Cola Company investing heavily in retail locations? For every announcement of closures and divestments, there seems to be a similar announcement of investment and rebirth.”
Often we miss the countertrends as we jump on business bandwagons. This countertrend is driven, he argues, by the basic concept of humans serving humans. People still crave that, as Prof. Kahn’s matrix shows, just like they also want convenience and good prices. As individuals, our impulses can differ for various purchases. As well, rents are falling, as some retail empires collapse and landlords can’t demand top prices, leading to opportunities for other entrepreneurs.
Offline and online have become tangled. Amazon buys Whole Foods, and can use that for distribution. Bonobos, an online retailer, responded to demand from people wanting to try on its clothes with Guideshops, where Mr. Satell notes customers can get fitted, receive advice from a stylist and have their purchase shipped to them. “Apple doesn’t care whether you make a purchase at one of its stores any more than Bonobos does. Their locations exist to provide the kind of human connection that you can’t easily get online,” he says, adding that “value never really disappears, it just shifts somewhere else.”
That’s not to underplay Amazon’s impact. I set out a year-and-a-half ago to look at the David and Goliath struggles in my hometown between independent retailers and the chains – a small, local pharmacy and Shoppers Drug Mart; a health food store and Loblaws and Shoppers; and an independent bookstore and Indigo. What I didn’t expect was that for each Amazon was also a continuing threat – indeed, the only business owner sanguine, perhaps because he was nearing retirement age and also because he had withstood Indigo down the block for many years, was the book store owner. Amazon’s impact is deep and wide. It is relentless (which happens to have been an alternative name founder Jeff Bezos considered, and to this day relentless.com redirects to Amazon.com, I learned from a recent Wired article.)
But it can be countered, as Prof. Kahn notes, if companies find another successful route to satisfy customers. That’s basic to retail. Picking strategies from that mix in an ever-changing commercial environment is not easy, however.
- Mon pay c’est l’hiver Gilles Vigneault sang. So in a country of winter, why are Canadian retailers hooked on outdoor collections of big box stores that may be acceptable if you have only one destination in mind but are a disaster for shopping excursions, browsing between stores in deplorable weather. Tanger Outlets’ lovely mall near Barrie, Ont., became a series of outdoor stores in its Ottawa version – cold, windy, snowy, freezing rain Ottawa. Mon pays c’est un centre d’achat. Bring back the malls.
- The best way to have good conversations with your colleagues, says consultant Wally Bock, is to have lots of them, and not just about work.
- Worth reading: Matt Quinn’s short essay, Amazon stands for nothing. That almost makes it beautiful.
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