Looking Back/Looking Ahead: Retailers Pick Areas in Which to Excel
What follows is the first in a series that present a chance to reconsider topics from past RetailWire discussions.
It was this week in 2006 when RetailWire posted a story and discussion on a then new study by AlixPartners that concluded, rightly so, that retailers cannot be all things to all people. The study confirmed that, instead, retailers should concentrate on owning one or two of the five key criteria that consumers have when evaluating a store.
The five items identified by AlixPartners at the time were: price, product, service, access and overall shopping experience.
Fred Crawford, a managing director at AlixPartners' office in New York and co-author of The Myth of Excellence with RetailWire BrainTrust member Ryan Mathews, told MarketWatch at the time, "If you're spreading precious assets, peanut-butter style, evenly across all five attributes, you're either wasting money or, worse, condemning all five to mediocrity."
He offered Wal-Mart as a retailer that excels on a few measures important to its customers. "People might not enjoy shopping at Wal-Mart, but they can get so many things done there, they tolerate it," he said. "Love them or hate them, Wal-Mart really dominates the consumer psychology."
RetailWire BrainTrust panelist George Whalin, President & CEO, Retail Management Consultants, submitted a counterpoint.
"The idea that 'in many respects, Wal-Mart defines retail in America' would be a sad statement about the retail industry...if it were true!," wrote Mr. Whalin. "Fortunately there are a good many other retailers in America who place a very high value on the retail attributes of price, product, service, access and overall shopping experience that were the cornerstones of this study. Their customers recognize and appreciate the focus these retailers place on these attributes."
Some panelists keyed in on other operators and differentiating strategies.
"While they certainly aren't hidden from the press, Starbucks and Chico's have mastered the art of excelling in a few areas to drive business results," wrote Gene Hoffman, President, Corporate Strategies International, "And they have accomplished it by converting a commodity (coffee) into a "social fashion" and by selecting and sizing women's clothes in a process that soothes the targeted female shopper."
"Certainly J.C.Penney is doing an excellent job of being a clothing department store, including mail order and e-commerce," offered Mark Lilien, Consultant, Retail Technology Group. "They decided it wasn't worth losing money in many hard goods categories and discontinued them. They decided to avoid brand name price wars so they depend on their private labels.
"Trader Joe's decided to specialize in the unusual, creating more and more meaningful exclusives, ignoring the price war attractions (commodities and brand names everyone else carries). Dominance is less likely the more territory a retailer tries to conquer (more categories, more price points, a wider audience). And successful private label leads to a virtuous circle of better margins, better profits, and increased customer loyalty."
Discussion Questions: Of the key points of evaluation defined by AlixPartners (access, price, product, shopping experience or service), which do you think is most important to the largest group of consumers in today's environment? Two years hence, are there now any other points of evaluation that you think need to be added or removed from the list? What retailers do you the best exemplify the lessons in the AlixPartners' research?