Retailers Pick Areas in Which to Excel

Discussion
May 05, 2006
George Anderson

By George Anderson


Conventional business wisdom says it is a mistake for retailers to try to be all things to all consumers. Now a new consumer research study confirms that shoppers feel exactly the same way.


According to the 2006 AlixPartners Consumer Sentiment Index, when it comes to the key criteria shoppers use in evaluating a retailer (price, product, service, access and overall shopping experience), merchants need to pick a couple of areas in which to excel and be satisfied with being good enough on the remaining points.


Fred Crawford, managing director at AlixPartners, told MarketWatch, “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 pointed to Wal-Mart as an example of how excelling in a couple of areas can drive business. The retailer, Mr. Crawford maintains, makes consumers’ lives easier by allowing them to, what he calls, “chore stack.”


“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.”


On the other end of the retailing spectrum, consumers’ perception of value in upscale goods has changed. “There was a time when house label products were obviously inferior to national brands,” according to Mr. Crawford. “Those days are gone. People don’t see enough of a difference to pay the difference in price.”


While price, or at least value, for the dollar plays a role in consumer decision-making on polar ends of the retailing world, service is still a key component in certain channels.


So-called DIY retailers such as Home Depot and Lowe’s, for example, are finding growth through “do it for me” services. Others such as Best Buy with its Geek Squad and installation services are also benefiting from helping consumers get projects done or deal with problems.


“For retailers, the margins on providing services to consumer are very attractive. People have less time, more disposable income, and they want to invest in their homes,” he said. “They also don’t want to spend three Saturdays in a row assembling an entertainment system.”


To register to download a pdf (Adobe Acrobat required) of the AlixPartners 2006 Consumer Sentiment Index report, go to www.AlixPartners.com/csi2006.


Moderator’s Comment: Beyond the usual suspects (Wal-Mart, Target, Wegmans, Costco, Nordstrom, etc.) are there retailers
that get less press that can you point to as having mastered the art at excelling in a few areas to drive business results?

George Anderson – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

16 Comments on "Retailers Pick Areas in Which to Excel"


Sort by:   newest | oldest | most voted
Michael L. Howatt
Guest
Michael L. Howatt
14 years 9 months ago

There is a place in downtown Western Springs, IL. called Casey’s Meat Market that just celebrated their 25th anniversary. They sell high quality meats, and just over the past few years started selling related items (stuffing, gravy, rice, etc.) They never wanted to be anything more than what they are and have survived in the face of Wal-Mart Supercenters, Supermarkets and the like.

Most people in the area don’t even give it a second thought to stop by there and purchase meat after finishing their grocery shopping. Good product, excellent customer service and a fair price still go a long way. Sam “the butcher” would be proud.

Al McClain
Guest
Al McClain
14 years 9 months ago
Consumers are definitely willing to overlook a lot of things to get a cheap price (although that doesn’t mean that they won’t complain about it). But, there is a magic line for every consumer and if a retailer crosses it with poor service, poor quality, a surly attitude, or whatever it may be to that particular shopper, they’ll say “I will NEVER set foot in that store again.” We all have our own list of retailers that have crossed our magic lines – the art for retailers is figuring out how not to cross the line for too many shoppers. Amazon has done a great job of excelling in a number of areas – especially in terms of becoming a resource for shoppers. One can do a lot of things there that can’t easily be done elsewhere, mainly around previewing items, reading expert and consumer reviews, adding them to a wish list, etc. Not that the individual tasks can’t be done elsewhere, but at Amazon, it’s all done fairly easily in one place, so why… Read more »
Gene Hoffman
Guest
Gene Hoffman
14 years 9 months ago

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…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.

Karl Haller
Guest
14 years 9 months ago

While I agree with the concept of the study, I’m surprised it’s being considered “news,” as it’s a repeat of Crawford’s Myth of Excellence book from a few years ago.

George Whalin
Guest
George Whalin
14 years 9 months ago

The reality is that American consumers have had to settle for “good enough” with some retailers simply because management in those firms finds it easier and less costly to do everything they can to serve their customers and provide the best products and shopping experience.

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! 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.

Matt Werhner
Guest
Matt Werhner
14 years 9 months ago

I know Publix is one of the big guys but they are a perfect example of a company excelling in service. Because they exceed in this area and their reputation is based upon this, the company starts many of their products at a higher price point than their competition. This simply proves many consumers still do put a high priority on service.

Bernie Slome
Guest
Bernie Slome
14 years 9 months ago

Every retailer needs to find their niche. Likewise, they need to decide their strategy and what areas are most important to concentrate on. Wal-Mart believes that price breeds loyalty. I would disagree. I would think that if the customer experience is poor, the consumer will switch from Wal-Mart if the price is lower elsewhere. In order to name retailers besides Nordstrom, Wegmans, Target and Wal-Mart who have mastered the art of excelling, all you need to do is look at those retailers, like Dress Barn, who are continuously increasing the store comps quarter over quarter year over year.

Lee Kent
Guest
14 years 9 months ago

Now that ‘price’ has essentially been removed from the list by the likes of Wal-Mart, we are seeing amazing rebranding in the retail market. As mentioned above, retailers like Chico’s and Zara have reeled in buyers through their monthly infusion of new merchandise. The customer can’t wait to see what they may have that’s new so they make frequent visits. Also, Best Buys’ amazing turn-around, I believe, was largely influenced by the Wal-Mart factor. They are now creating an environment known as tech savvy and ‘fun.’ That’s what it is all about these days and frankly, I am EXCITED about what I am seeing. The face of retail is changing and all for the best. We are going to see a shopping experience unlike anything we have seen before and all because a little retailer called Wal-Mart removed price from the equation!

Kai Clarke
Guest
14 years 9 months ago

The study points out some obvious facts. Retailing is a difficult soup to get all of the components correct with, and it is better (and expected by most consumers) to excel in a few of the critical areas, rather than remain mediocre by trying to be the best at all of them. The great retailers have done just that; excelled at a few of these. However, most of these are continually trying to increase their positioning in the rest by trying “new concept stores” which change their proven mix and increase their strengths in more of these areas (usually customer service). However, these don’t seem to ever really become successful because of the requirements which dramatic shifts like this require, as well as the increased resource deployment, human resource management, advertising and of course costs. The key here is to stay focused on what has worked.

Laura Davis-Taylor
Guest
Laura Davis-Taylor
14 years 9 months ago
Another point here…what is most important to the shopper is very much tied to their demographics, psychographics, lifestyle and life stage. Take Wal-Mart as an example…as a poor college student, I was willing to do anything for price and put up with a underwhelming store experience and fair product selection. As a thirty-something professional with a good income, they lost me to Target until they got my interest back with this year’s new store design and product mix. They’re still focused on price and the store experience is not as good as Target’s, but I can find something there for me in a store that doesn’t turn me off. The importance of this notion depends on the particular retailer and products/services they provide, but customer-centricity has rapidly been embraced because people have different wants and needs and pledge allegiance to those that accommodate them. Major retailers are realizing that they must understand what niches they want to excel at, but they must also tweak things at the store level to best appeal to the specific… Read more »
Ed Dennis
Guest
Ed Dennis
14 years 9 months ago

Is it too hard to be excellent OR just too much trouble?

Michael Tesler
Guest
Michael Tesler
14 years 9 months ago

How can you knock $312 billion in sales? Of course “no one I know shops Wal-Mart” is being said a thousand times as I write this…but does that really matter? Everybody else we talk about is lucky (and very good) to be doing $20 billion.

As far as other retailers that are doing well picking areas in which to excel, I’ll take Container Store (training that produces real customer service) and the Apple Store (knowing and relating to their target audience).

Dan Nelson
Guest
Dan Nelson
14 years 9 months ago

Price is certainly a key driver in shopping decisions, and it would be challenging, to say the least, for anyone in CPG retailing to try to “out price” Wal-Mart. Their mantra of “Always Low Prices, Always” is something they monitor and will own, whatever challenge comes from others.

That said, the equation of “value” is a component of experience over price, and retailers who focus on experience will win strong shopper loyalty. Starbucks sells coffee, and you can find coffee for lower prices anytime you want…But the Starbucks experience is why they continue to win and build customer loyalty.

The AJ’s retail brand by Basha’s is another great example. The prices are not the lowest in the marketplace by any means, but ask any shopper why they spend their money in AJ’s, and they will tell you how pampered and catered to they are every time they shop.

You can only reduce prices so much, but their is no ceiling on over delivering on shopping experience.

Race Cowgill
Guest
Race Cowgill
14 years 9 months ago
In my view based on our research, the points made in the kick-off for this discussion may confuse the issues, and are perhaps not quite correct. “You can not be all things to all consumers.” Actually, it depends on how broad your “target” market is and what their core expectations are. If your target market is 25 to 75 year olds of incomes between $25,000 and $80,000, and you are selling them fresh and packaged food, household cleaning products, health and beauty care, sporting goods, hardware, automotive, kitchen products, yard and patio, clothing, pet care, etc., then your target’s core expectations are all over the map. In this case, find out what matters MOST to ALL your target, and do those things well. This is not actually difficult, though few do it (for definite reasons that I will not explore here). But say that you are a retailer of high-end outdoor gear with a target market of 34 to 54 year olds with average income over $50,000. You can easily meet all of this market’s… Read more »
Mark Lilien
Guest
14 years 9 months ago

Certainly J.C.Penney is doing an excellent job of being a clothing department store, including mail order and e-commerce. 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. Barnes and Noble stores aren’t the least expensive places to get books, but they’re certainly very pleasant and their comps are fine, too. Furthermore, they’ve been enlarging their private label book business for years. 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.

Thaddeus Tazioli
Guest
Thaddeus Tazioli
14 years 9 months ago
I agree with premise of the article, but I’m not sure I agree with the five categories. Back when I was an undergrad at Northwestern, my professor (whose name now escapes me) outlined a three point system based on technology, service and price. He cited FedEx (technology), Nordstrom (service) and Wal-Mart (price) as examples of excellence in each discipline. FedEx is a little more than 39¢ to send a letter and they don’t ask you what color box you want, but they get there absolutely, positively overnight (well, usually). Nordstrom does offer a beverage and their boxes are beautiful, but course, their level of service comes at a price. While Wal-Mart is certainly a technology driven enterprise, it is only used to drive price lower, not improve almost any aspect of the customer shopping experience. That said, I think “access” could be cut from the list as I fail to see how it is a measure of excellence. I also think overall shopping experience could be cut because while I understand what they mean, I… Read more »
wpDiscuz

Take Our Instant Poll

Which of the key points of evaluation, as defined by AlixPartners, do you believe is most important to the largest group of consumers?

View Results

Loading ... Loading ...