Looking Back/Looking Ahead: Retailers Pick Areas in
Which to Excel
05/09/08
By George Anderson
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."