While we hear about retail bankruptcies almost every week, it’s not everyday that a legacy brand like Barneys succumbs to the tide as happened a few days ago. However, it’s not all doom and gloom in the consumer space. That’s because a handful of retailers are delivering strong results by constantly innovating to improve customer experience.
The formula these retailers are using is simple, yet it first requires a mindset change in how they put their customers at the center of their strategy. "Location, location, location" was the key to success in retail for many years. This meant picking the right location was critical, but ironically, it also led to oversaturation as the retail square footage per capita in the United States became much higher than any other country. This fundamental fact, coupled with the growth of online retailers delivering huge convenience benefits to customers has put significant pressure on brick and mortar stores that don't offer a meaningful point of difference. So, how are retailers like CVS, Dick’s Sporting Goods, REI, Aldi and Fleet Feet doing so well in this environment? Let’s look at some of the tactics in their playbooks.
Choose the right market
Successful retailers have foresight in picking growth markets where they want to play. CVS made a strategic move to transition from being a just pharmacy to being a change catalyst riding the wave of consumerism in health care. Their new mission is to transform the consumer health care experience.
Meanwhile, Rite Aid, now folded under Walgreens, focused on operational efficiency, which did not work out in a changing market. Golf specialty stores went bankrupt or got acquired as millennials did not pick up the game as much as their parents did.
Know your customers intimately
The service industry has always been about personal attention. Back in the 1990s, Peppers & Rogers defined the basic principles as “I know you; you tell me what you want; I make it; I remember next time." Such personal service seemed impossible for large scale organizations until technology shifted the paradigm. Today, leading retailers heavily invest in understanding the behaviors and attitudes of their customers both in and outside of their stores to offer personalized experiences. For example, Dick’s Sporting Goods, whose core customer is the youth athlete, understands data is the new oil and has acquired digital solutions used by youth leagues, namely Game Changer and Blue Sombrero.
Align with their values
In today’s connected world, brands and retailers that talk about why they are in business and walk the talk are standing out and are earning customers’ loyalty. REI believes “It’s in the wild, untamed and natural places that we find our best selves,” and they work to “Awaken a lifelong love of the outdoors, for all.” For example, Aldi knows its customers choose to shop there because they are making smart choices and they don’t need to pay premium prices for a delicious box of animal crackers, and CVS stopped selling tobacco products when they decided to be a health care company despite the short term sales impact it would create.
Creating meaningful points of difference can’t be achieved without innovating to address customers’ pain points. Buying a new baseball glove is very exciting for a youth player, but waiting for it to break-in is painful. So Dick’s invested in glove steamers so it would be game ready as soon as you walked out of the store. Fleet Feet is taking 3D scans of customers’ feet to ensure the best shoe fit so runners’ dream of finishing their first 5K is not interrupted by injury. CVS is rolling out HealthHubs to offer convenient, integrated experiences and REI recently launched gear rental to help reduce their carbon footprint.
In sum, Darwin’s theory of survival of the fittest is being proven true in retail as we witness the success of retailers that adapt and the demise of those that hold on to the old rules.
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