The retail industry is at a bit of a crossroads. Big retail segments, like record stores, bookstores, and video rental shops, have nearly disappeared, while others are struggling to fight off online and discount big-box competitors.
Rather than trying to out-discount the discounters, or compete with the scale on which Amazon and other online retailers operate, I think retailers should be reevaluating their value propositions, both to their customers and to their consumer manufacturing partners. How do retailers in general, and your retail chain in particular, bring value to business partners and consumers?
I think the key to this is taking advantage of the two things retailers have in spades, and that all manner of disintermediation and price undercuts can’t take away: knowledge and space.
Focus less on selling, more on educating. Retailers looking for an edge over online and discount counterparts can find it in the on-demand knowledge of their employees. Online retailers like Amazon have some degree of product knowledge, but they don’t have the ability to tell whether individual consumers are actually looking for it – risking cognitive overload in the process.
On the other hand, retailers have extensive product knowledge, and sales reps to deliver it exactly when the customer wants it – and not a moment before. La-Z-Boy’s simple in-store segmentation method, designed to figure out what kinds of sales expertise different customers are looking for, is an excellent example of how frontline staff can be trained to recognize the optimal way of delivering product knowledge.
Revive – or establish – emotional connections. It’s standard advice to companies and brands fighting commoditization and discounting: figure out the way your brand makes consumers feel, and pull on those heartstrings to shore up margins and marketshare. It’s a strategy used by businesses both tiny and gargantuan: for instance, Ukrops’, a family-owned grocery store in my hometown of Richmond, VA, dominated the grocery market in that city despite maintaining higher prices, refusing to sell alcohol, and being closed on Sundays. Why? The chain had a long association with the city of Richmond, such that shopping there was almost an exercise in civic pride.
We’re not all family-owned grocery stores, of course, and most of us can’t pull the heartstrings of civic pride convincingly. But we can figure out ways of plugging into our customers’ emotions: our study on Accelerating Loyalty can get you started.
Sell services, not products. Leveraging product knowledge by service selling is usually a B2B affair. But if your product is or has the potential to be confusing, service sales can be a great way to keep the customer happy, reinforce the brand promise, and fatten up margins a bit at the same time.
Best Buy’s Geek Squad, as well as similar services offered by other electronics big-box stores, is the quintessential example of this, and I think other retailers will get into the game as disintermediation begins to affect their core businesses.
Embed into routines. Retailers may be threatened by cheaper shipping and the ubiquity of computing platforms, but the one thing they have a ton of that online retailers can’t match is space. Physical space, that is – retailers occupy a dominant place in the built environment, and are fixtures in the midst of human routines. By piggybacking onto an unassailable part of people’s daily lives, retailers can give value to the customer in ways online stores can’t.
Redbox, for instance, has monetized the routine of stopping off at the grocery store to grab something for dinner on the way home from work: customers grab a bite to eat, pay for their purchases, and walk directly by a vending machine offering cheap movie rentals on the way out. 7-Eleven is trying to monetize the pre-work rush by offering gourmet, ready-to-eat snacks. And in a lot of places around the world, Starbucks has monetized the mid-morning work break.
MLC members – how are your companies shifting your value propositions to take advantage of the new normal? Let us know in comments.