How To Win Over Customers in an Era of Endless Disruption
There are two contrasting trends emerging in retail – fast and frictionless verses experiential and time well spent.
Recent technological advancements in retail have focused on speeding up the customer experience, making it as efficient as possible, especially around the checkout; as we’ve seen in the Amazon Go stores, where it’s been eliminated completely. In contrast, the growing experience economy has placed greater emphasis on the notion of ‘slow retail’ – slowing down the shopping experience by creating even more ways for shoppers to engage with brands in a way that goes beyond transactions to memorable experiences. Think REI and their in-store rock face or Sweaty Betty and their in-store fitness classes.
So what is the right strategy for a retailer to pursue to be successful?
Retail expert Barbara Kahn eloquently summarises the choices for retailers in her Success Matrix (see figure 1) where she lays out 4 key dimensions: Brand, Price, Convenience and Experience.
Regardless of what strategy a retailer chooses, the customer must always be at the center. With the amount of choice available to customers they will inevitably gravitate to the retailers who offer them the best value on the dimensions they care about. Therefore all retailer strategies need to provide superior value over their competitors – either by providing superior benefits and pleasure or by reducing more pain and inconvenience.
While traditionally retailers have competed on just one value dimension, for example, frictionless (Amazon) or low price (Walmart), in her latest book, “The Shopping Revolution”, Kahn’s warns that pursuing one value dimension is no longer enough; to be successful retailers need to be leaders in two dimensions of value. The case in point being while Amazon ‘own’ frictionless they now also do so at low cost. Walmart primarily competed on low cost but are now becoming increasingly convenient too.
Figure 1. Kahn’s success matrix
Faster isn’t necessarily better
Low cost strategies are risky and rely on selling high quantities at very low margins requiring significant efficiencies in infrastructure and operating models. We believe where a retailer has the potential to add the most value and stand out from their competition is in the experiential; where offering an enjoyable, valued experience presents an opportunity for shoppers to connect with brands on a deeper level.
It’s a constant battle
As retailers innovate and offer better and better value in each quadrant, customer expectations are re-set at those new levels i.e. offering next day delivery is no longer sufficient, now customers expect the option for same day delivery. Retailers can never therefore rest on their laurels, but need to constantly track customer expectations to ensure they are always delivering value at the caliber that is needed to be a market leader, if not leading by example and offering innovative experiences.