Why Retailers Should Focus on Value, Personalized Service and the Local Market
The ground has been shifting under the world of retail, but in my opinion, the real quake hasn't hit yet. There are three major factors causing this upheaval: economic uncertainty that's begun to split the middle class, the increasing share of wallet moving online, and the shift from the boomer generation to millennials as the driving force.
Each of these factors alone would have significant impact on the world of retail; the three combined have affected every retail segment. Even Wal-Mart is feeling the impact as its revenues slip and profits fall. While there's no "magic bullet" to address these changes (is there ever?), a deeper examination of these factors brings to light consistent themes and provides a jumping off point to ward off a real quake. There are immediate, low-risk changes that every retailer should consider implementing as soon as possible.
1. A higher focus on value. Value is vastly different from price. While price will continue to be the only important variable for the bottom third of the market, value for money (and time) spent has bubbled up as a decision point for consumers. The challenge for retailers is shifting from a price strategy to a value strategy. The two are related but are very distant cousins. A properly executed value strategy is much more beneficial to the bottom line than a low price strategy.
For the past 20 years, too many retailers have shouted "low price" in the hopes of getting shoppers to believe — and buy. The advent of mobile and the transparency it's brought has quickly changed the impact of this tactic. Today, a low price can be trumped by a slightly higher price when there's an added value included in the mix. Convenience, information, instant gratification — all of these and more are part of the consideration process.
2. Personal service needs to be the bottom line. Personal service is now an expectation. Online retailers, specifically Amazon.com, have changed consumer behavior with suggested selling based on purchase history. Consumers, liking this convenient benefit, have shown they're willing to part with highly personal information for it. For brick-and-mortar retailers, this means the customer service paradigm under which they've operated forever needs to be rethought. Shopper data is critical, whether for online or brick-and-mortar retailers, so some sort of database tool is required.
Loyalty programs are a good place to start … for rethinking, that is. Most people belong to several loyalty programs and yet have no idea why. They see no value to being part of the program. Loyalty programs should be easy to use (hint: forget the key tag and go mobile) and provide ongoing and relevant benefits.
3. Local relevance trumps national presence. Retail, like politics, is a local issue, and becoming more so. Millennials are a diverse group; retailers taking a one-size approach with millennials will alienate them. Marketing must also feel homegrown and genuine. Insincerity will be called out loudly via social media, and forgiveness will come slowly, if at all. The corollary here is that what other shoppers say about your brand is far more important than what you say about it. While that's always been true, access to peer reviews is now the first stop for consumers looking for information.
First-mover advantage is still a possibility in many segments, as middle-market retailers struggle with the changes and how to address them. Speed is critical, and while mistakes are likely — even necessary — it's best to be open and honest when they're made. Transparency is here, like it or not, and the truth will come out. It's always best to attack head on than wait for the wave to wash over you. Just ask Target.
All of the elements above are part of what consumers today expect: a local, relevant and personalized experience. That's an expectation that requires more than a smile and a hello. The working definition of this personal service will vary by retailer and which segment of the market (high or low end) it expects to engage. Lower-income discount shoppers may be less interested in personal service, yet it's still a nice value add. At the upper end, personal service is a critical and expected component of the overall offer.