I was asked to write a piece for a magazine that involved reflecting on which of the major players in the UK retail market really set a great example that smaller, independent retailers can follow in order to mirror their success. The answer I gave is below…
Customer centric multi-channel retail operations
Marks and Spencer is a great example of how to run an efficient multi-channel operation. Their ecommerce site supplements their stores and the customer doesn’t ever need to feel that if they’ve bought through M&S online that they will have issues, for example, if they want to return items to stores. The channels work together in harmony for the benefit of the customer. This approach to the delivering a “customer-centric” experience SHOULD be the norm for all retailers, but in the most part the bigger players still have work to do to match the standards in multi-channel service experience set by M&S and also others, such as Argos and Game. Smaller retailers do have the opportunity to embed customer centricity into their business with relative ease. For example, if offering multiple channels (stores and online for instance) ensure that customers instore can browse and order via your website for collection instore, or, if customers want home delivery of their purchases, rather than selling to them through the EPOS, your sales staff could place the order on your ecommerce, on behalf of the customer, in order to trigger the home delivery.
Research has proven that the multi-channel customer, one who can browse via one channel and transact via another, is worth 130% of a single channel customer – so it’s an area where a smaller retailer, who would typically be more nimble and responsive, can deliver an excellent customer experience. Recent stats also show that in 2011 c. 10% of ALL online sales were “click and collect” – the convenience of picking up from the local store rather than waiting for a delivery is clearly something consumers value. When implementing your multi-channel thinking, your processes and systems, and when training your team, make sure you provision for click and collect (as well as “ring and reserve”) as these various ways to make your customers’ lives easier will enable you to build loyalty with them. One of the reasons that the internet has become so key to the consumer is access to information in a convenient format – extend that thinking of “making buying from you convenient” to all that you do to win their loyalty where your less nimble competition will fail.
Get your positioning right, be clear about what you offer and consistently deliver on your service promises.
Another retailer to take a look at is Hotel Chocolat – a true specialist who have enjoyed rapid expansion. Operating at the more luxury end of the market, their success has been underpinned by their constant service delivery, product quality, and instore presentation. Hotel Chocolat don’t compete on price, they compete on service and experience; able to charge a premium for their product due to the uniqueness of it and the whole brand experience. Consider the congruence of their brand positioning – the 4 key factors being product, price, presentation and service. Hotel Chocolat are higher end on all 4 of those areas, meaning that they lead their customers to expect a quality product, great service, in a beautiful store environment. With those expectations set, consumers also expect a higher price point than an average chocolate item. Thus, leveraging the whole brand experience, makes them “reassuringly expensive” (to quote Stella Artois) and customers have confidence and trust in the brand to part with their cash.
Smaller retailers can learn from this – in the face of the sheer buying power of the major chains smaller, independent retailers (as Hotel Chocolat was only a few years ago) need to stand out from the crowd as competing on price is suicide. When you move away from trying to compete on price, shifting your positioning and your total brand experience to competing on service and experience, THEN you can quite justifiably increase your prices. They beauty of this is that you will attract a more discerning customer, who buys into your brand experience and appreciates what you have to offer, rarely ever questioning your price point. When you compete on price you enter into a downward spiral, no one really benefits (apart from the consumer), and it is completely unsustainable. The kind of customers you will attract with a low price point / value based brand experience are typically very price sensitive, not buying into the great service and attention to detail that you, as a smaller retailer, can offer. All they are buying into the lowest possible price point. You won’t secure loyalty if you compete on price as you’ll be considered a commodity, so follow Hotel Chocolat’s example (and in fact the example also set by retailers such as White Company, Lush and Waitrose – all doing well where others are failing) and remember this mantra “don’t compete on price compete on service”!
Focus on agility, rapidly responding to consumer trends, and leveraging opportunities
Finally I’d like to mention Debenhams – not necessarily the first retailer to spring to mind for innovation but actually they are one of the most entrepreneurial “major players” out there. Debenhams make quick decisions and get to market even more quickly. One example was the rapid implementation of their cash-for-gold equivalent… Within literally days of the decision to offer a cash-for-gold service they’d gone live with it online. The interesting feature however for me was not specifically the fact they made a decision and implemented so quickly, it was the method / approach to the process and operational impact that was so clever. Debenhams offer gift cards to spend instore in lieu of the gold. Whilst making nothing on the actual cash-for-gold process they do engage their customer to spend the cash generated with them and to thus achieve the retail sales margin on the purchases those customers make.
Thinking gift cards generically, it is rare indeed that a customer ever spends exactly the amount on the card, often topping it up to get something of greater value than the card itself. What smaller retailers can learn from Debenhams is 2-fold:
- Keep an eye on consumer trends, figure out how you can incorporate some of those trends in your offer, make a decision to do it and get on with it fast – you’ll get first to market advantage.
- If you know that your customers buy gifts for others from your store (as opposed to just buying for themselves) then a gift card has great benefits and you should get one implemented!
The benefits of gift cards include:
- Increased footfall – rather than your customer being the only visitor to your store the recipient of the gift card will now also visit. Perhaps they would not have done before; this is an opportunity to engage with a potential new customer.
- Increased sales – the gift card itself is purely cash in lieu of a future purchase. Upon redemption classically consumers spend more than the value of the gift card, thus you have the opportunity to increase the sale beyond the budget of the original buyer of the gift card.
So all in all, taking a couple of leaves from Debenhams book could inspire you to really hook into key consumer trends and leverage opportunities that might exist for you that you might not have considered before…
Take inspiration from the successful retailers, and avoid being dragged down by all the doom and gloom!
In summary, take some time to look at those retailers who aren’t reporting doom and gloom – there are quite a few who have reported some impressive figures even when their high street neighbours are in dire straits. Usually these retailers share common attributes, which are ALL attributes that a smart independent retailer should quickly be able to adopt:
- They have a deep understanding of who their ideal customer is and thus deliver 100% relevancy in the product offer, pricing and promotions
- They have great positioning, in the main they are higher end, so that they don’t compete on price, they compete on service. By delivering consistent, reliable service, they create brand advocates amongst their customer base
- They have a fearless focus on growth – through getting it right and proving the concept these retailers KNOW their business opportunities. They are not being deterred by global financial gloom – they understand their customer, positioning, channel strategy and growth potential and they’re not afraid to invest in growth at a time when many are downsizing
- They have been able to leverage technology – most of these most successful retailers have engaged with technology – making themselves mobile-ready, having a strong social media presence, and including some cute interactive elements instore such as touch screen displays for product information. Actually whilst technology can be daunting it neither needs to be overly complex or massively expensive and really adds to the process of customer engagement through attraction, conversion and retention.
- They have very tight control on costs – it goes without saying fearless growth comes at a price – almost all successful retailers have keep a very close eye on profits, costs, efficiencies and cash flow – meaning that they have had confidence in their decisions based on cold, hard facts. Smaller retailers needs to be mindful of this, it’s cash flow NOT profitability that kills businesses! Keep close to the numbers; be utterly focused on the detail because this deep understanding of the financial dynamics of your business will give you the confidence to make decisions AND to know when to walk away from an opportunity.
Happy trading 
Filed under: Consumer Trends, Increasing Sales, multi-channel, planning and controlling, positioning, Pricing and Promotions, Range Strategy, Retail Strategy, Service, The Retail Champion Tagged: customer centricity, independent retailers, marks and spencer, retail operations 
