While I do agree with the three brand positions mentioned, I don’t agree that there are only three. Retail is such a massive and complex system it’s impossible to generalize survival into merely three positions. Furthermore, the positions can overlap and blend. While it’s well understood that department stores are among the most challenged of any retail category, the formula for success is still very much a work in progress and the future is still very much uncertain.

Whether “discount” is part of your brand DNA, “value” needs to be. But don’t confuse one with the other — customers’ value perceptions may not be shaped by whether your store has the lowest price. It’s really about whether they are paying a fair price (in their minds) for the goods and services received, so “lowest common denominator” is not always the right answer.

Once you make the distinction between value and discount, I do agree that “convenience” is a common thread across all kinds of retailers. But what constitutes convenience? For some stores, it might be a saturation approach to their location strategy (think Starbucks or Walgreens). For others, like Nordstrom with fewer locations, it might involve everything from free shipping to the 24/7 curbside pickup that they are testing this holiday season. The Amazon model doesn’t fit all circumstances, but Amazon has clearly raised shoppers’ expectations.

Good categorization to start with. Within each of these there are a lot of things that you can do to ensure that your convenience doesn’t look like that next retailer’s version of convenience.

Of the three, the only one that has futurity is Third Wave. Discount is a finite road that leads to pain, suffering and no profits. Convenience may be the same road, we just haven’t arrived there yet.

Third Wave might be too much to ask of department stores. Their logistical models, profit models and physical lease commitments may make being Third Wave too much, but it is where each of them can find a way to survive and be relevant. The problem is, does anyone at the department stores actually know what the difference is between them and their competition? Raison d’être is a primary challenge for most of these stores.

These three positions are useful, but there are others. Look at Amazon, Whole Foods, luxury eyewear stores and salons, which offer comfort and quality. There will be a lot of ways to win in retail, as long as the customer experience comes first.

I don’t think a strategy is as simple as these three options. There is always an option for prestige as a brand position and others as well. The Third Wave option is more of a discovery position focused on independent “experts,” but that position is highlighted with national chains. I do not agree with the over-simplification of brand positioning into three buckets.

That said, department stores need to determine how best to engage with a target customer. The retailers, outside of Amazon and e-commerce, are singularly focused. In my mind, the department store is becoming irrelevant in the shopping experience. I see consumers choosing category “experts” to spend their money with.

Amazon is a unique platform and is more than a retailer at this point. They are becoming ingrained in the consumer’s life as a content solution, search platform and retailer.

Department stores need to find something to stand for in the consumer’s mind to survive.

I agree with Lee on the three brand positions. And I would say that for too many retailers the first two brand positions, unfortunately, are all that are getting their attention. Too many retailers are not focusing nearly enough on the Third Wave and are suffering because of it. Look at the brands Lee points out like Apple and Starbucks for example. Their prices are far from the lowest but their convenience, service and overall customer experience are fantastic. Too many retailers are too busy chasing after one another, not establishing any real brand identity, not providing exceptional service and other than their price they are not giving customers a good reason to shop them. Customers will still shop those retailers from time to time if the price is right and if it’s convenient but those retailers are not building brand loyalty like Apple or Starbucks. So if asked the question which is most important for Lee’s three brand positions, I would say the Third Wave. The reason: if the experience is right, you have… Read more »

It’s simply too challenging to summarize the retail brand positioning strategies into only three segments. What we are seeing in the marketplace is a blended model, which could be simplified as “hybrid retail,” which is a retail strategy that has a digital-first approach supported by an in-store showroom-like transporting experience, and removes all of the shopping friction.

The key to survival in the new retail paradigm is to be passionate about your customers, adaptive to new technologies, agile and creative with both speed and flexibility, by blending art and science to get the model right.

Given the escalating race between Amazon and Walmart, few others will have the infrastructure and resources required to compete on convenience factors now expected by customers for ordering, shipping and last-mile delivery.

Discount is a slippery slope. It requires scale to achieve best prices. And cheaper prices are easily matched by someone with more scale. Discounts are a temporary strategy, not a differentiator.

Lee Peterson’s description of the Third Wave describes those things which differentiate CX at “local touch points” where the consumer shops — whether it be online or in-store. More than 75 percent of customers begin their journey online, but that same percentage ends up purchasing in store — IF the local retailer customizes their CX and services.

At a recent Berkshire Hathaway meeting Warren Buffet stated that everything at the mall is online, and cheaper. The greatest survival skill for ALL retailers is to be able to offer experiences and services that customers can not get online.

The integration of these will create more and for the better. Department stores will have a tough go. Perhaps they will totally go away and come back in some other form. This holiday shopping season will give us some indication but my gut tells me it will not be enough to alter the trend.

Retail success in the future will be driven by the quality of the experience. While the Third Wave touches on the experience theme, it doesn’t go far enough. In my opinion we have to look beyond, as the article suggests, “quality, great environment, newness and spot on service.” Rather, we must consider every facet of experience as a critical piece of our strategy if we hope to remain relevant for the long term.

I like the breakdown, it seems like most value differentiators can be argued to fit in one of these categories.

Considering the first two categories, the take-away is that retail is becoming more about logistics and fulfillment capability than marketing capability.

Target and Walmart are upping their logistics game to improve convenience and value for shoppers.

And as for the Third Wave, Nordstrom has been experimenting with pop-ups, and Barney’s with “drops.” These give consumers the IRL experiences that they crave.

Department stores and other chains can still conceivably compete in any of these three areas if they make it a strategic priority.

The Third Wave encompasses many issues so it is difficult to think of this as only three. Price and convenience have always been major issues. Consumers will not pay more than they need to and have tools to determine where the low prices are. Convenience takes many forms; what is different is that convenience takes new forms as technology evolves.

The Third Wave seems to mean that retailers need to understand their consumers well enough to provide in-store experiences that entice them to come to the stores. I think retailers need to pay attention to all three strategies. Most of all they need to pay attention to what THEIR consumers want.

This model is too simplistic. Future survival depends on category as much as any of these. Department stores lost tremendous business to warehouse stores — so they are the most threatened. Meanwhile, home improvement stores remain strong despite Amazon competition.

Convenience is important. But retailers must sort out convenience that matters to their specific consumers — NOT relying on this list.

In the list, for example, Amazon has raised expectations for free overnight shipping … because its investors pay a huge loss on it to buy consumer loyalty. That’s NOT a successful strategy in the long run because profits must arrive at some point.

Finally, what’s omitted here (yet again) is that many of the “Third Wave” stores mentioned succeeded because of product. Innovative, good, well-delivered product.

It seems we keep forgetting that stores ONLY exist for people to buy product.

I agree that these three strategies are critical, but I do not think they act as standalones. Rather, discount retailers must offer a solid multichannel experience and good customer service. There is no secret ingredient. Only by engaging customers in their preferred channel, and delivering a strong experience in-store, will retailers thrive in this new age of competition and declining customer engagement. One strategy that was not mentioned was the delivering of services to add value to the products. Education still has a high perceived value and acts as an incentive to drive customers into the store as well as to make them into raving fans, which every retailer wants. Other services such as yoga classes in stores that sell yoga equipment, fishing classes in fishing stores, etc. all add value to their brands, drive customer engagement and frequency and result in higher revenue in the long run. But one strategy stands above all the rest: engaging and empowering store associates to do the very best they can to connect with customers, leverage product and… Read more »

I just don’t agree with these at all!

Discounting: Macy’s is discounting, J.C. Penney is discounting, heck Sears is discounting everything at the moment, yet all of them are doing badly. Nordstrom discounts far less and is doing better; Coach stopped discounting so much and its financials have improved. Value for money and justifying the price are important; discounting per se is not.

Convenience: IKEA is not as convenient as it should be, neither is Wegmans. Both do well because they have products people really want and are prepared to travel for.

Third Wave: Urban Outfitters and Whole Foods are mentioned, neither are doing that well and have seen sales slide. Not great examples of success!

The three ways are solid and great definitions, but as soon as we say there are the only these three ways, someone smart will surely set about innovating to find another way. Use the three definitions with an open mind to finding the other ways.

The three brand positions offered here represent a viable approach, although the categories are overly broad and need not be mutually exclusive. They represent a good start. The old days of either having a lowest cost strategy or a differentiated strategy have become too simplistic with the myriad of choices consumers have today on top of the collapsing format and segment boundaries to which we’ve become accustomed. So, where do we go from here? I see the starting point being the market segment that the retailer is going after. How you position and engage not only depends on the product categories offered, but also on the shopper and how they shop that category. So the strategy matrix would have the set customer profiles along one axis and the proposed strategies along the other based on the category. In addition to the specific set of strategies, I view consistency in any strategy — from vision through execution across all customer touchpoints, back-office processes, and all communications — as absolutely necessary to long-term success. With today’s demanding… Read more »

The retailers that survive will be the ones that focus on the best mix of strategies as well as establishing a BRAND. From a Discount (D) or price perspective, retailers don’t necessarily need to be the lowest price or need to match Amazon, if they have a differentiated product (BRAND) or service level. I see the brand as critical to survival. The best brands in the world today frequently don’t have discounts, convenience or third wave but they have a brand people want and will pay full price for. Long term survival requires the need to embrace at least the convenience strategy. Convenience (C) is crucial for the success of every retailer. A frictionless and easy shopping and buying process is imperative. I think Personalization may be a better descriptor than Third Wave (TW), but however you describe it, retailers need to adapt their model to what consumers want. Of the three strategies, Personalization will be the most important way to attract and keep customers for the long term. The challenge for retailers is to… Read more »

Discount relies too heavily on economies of scale to beat Amazon/Walmart there, so convenience and third wave are the way forward.

I’d take convenience but add Brand as the next most important factor. If you own a brand that shoppers want, then you’re a draw. If you are just selling someone else’s products then the long term will not be as kind to you as the past was.

I think we are getting a bit sloppy if we throw all retailers into a bucket and say they have to exhibit at least two of these strategies. I also think the Third Wave strategy is leveraging way too much “je ne sais quoi” and allowing literally no guidance on exactly what those retailers are doing to be successful. We need to make those intangibles more tangible so we can learn from both successes and failures. “Discount” is too easy of an “excuse” to remain in the game. Anyone can do it and that is no longer a differentiator. “Convenience” is critical, so I’ll agree that that one. “Brand” is the one we’re missing. Those “TW” stores are all about “Brand.”

Trying to simplify the formula for retail survival down to three issues — with one of them being discount — is inviting a race to extinction. The challenge will be met when retailers decide to erase the status-quo, step back and understand themselves and who their customers are. Then and only then can you formulate a strategy along with its tactical implementation, analog and/or digital, to achieve your goals and objectives on your shoppers’ terms — not yours!

Who are your loyal customers? Understand who they are and you can then design and implement processes that they value and reward. Trying to identify and define a path forward for retail with a simple formula is a formula for failure.

Discount, Convenience and Third Wave are all viable strategies, but all three are not needed by each retailer and there are other strategies. Another strategy for retailers is having unique products to offer that will attract consumers as their only option. Consumers likely will buy from the retailer that provides the best service at the best price, but some consumers will buy based only on price while others will sacrifice price for service. Department stores’ best strategy is to offer unique products, including private label, and provide great service either online or in-store.

This is a bit myopic of a position considering that the next retail shakeout will be who best embraces the fusion of online and brick and mortar retail. This is demonstrated by the race between the king of online (Amazon) opening stores and the king of brick and mortar buying and developing a stronger online presence as rapidly as possible. Both of these Goliaths are racing to a clash that will terminate much of today’s retailers, with only a few select niche players left.