Global Retail Winners: Lessons to be learned

March 11th, 2011 – Michael Tonkin

In tough retail times, its cold comfort to know that your competition is doing worse than you – but you’ll take any win you can get right now. This approach might rock you to sleep each night but the reality is that, despite the doom and gloom, there are still many retailers on the global stage that are smashing their numbers and have all the momentum right now. I bet you want to know who they are and learn from what they’re doing.

In October 2010, I spent a month on the road meeting top managers from the best performing retailers as well as attending the World Retail Congress in Berlin. What a month! This experience gave me 10 valuable lessons on winning in retail right now. Check them out.

1. Stay relevant and differentiated to the customer so that it’s not a price war. Put the customer in the middle of everything you do. Myer in Australia do a fantastic job of using the data from their Myer One loyalty program to develop customer loyalty and drive sales. Tesco in the UK hold every employee accountable around customer objectives. Mystery shopping might be a nice thing to do, but it’s time to get real feedback from real customers and truly position them in the middle of your organisation.
2. Build innovation into your everyday practices. It’s impossible to create sustainable growth from the two or three creative geniuses in your organisation and it’s just as impossible to think that people in senior roles can both perform their line management function and innovate and implement new ideas effectively. Take Urban Outfitters in the U.S. In recent years, they’ve developed an incubator for new product extensions, whereby people are assigned to work exclusively on new products and new brands. In February 2011, they launched wedding into their apparel business. Other retailers like Starbucks and Collective Brands attribute financial success to getting inspiration directly from customer feedback. Internally, think about how you can get your best talent to tackle the biggest challenges and opportunities.
3. Make sure your leaders at every level are capable of setting direction, cultivating the right culture and holding people accountable. One of the key roles of a leader is to develop a simple but sophisticated strategy, communicate it to the team and get everyone committed to it. Does this happen in your organisation? Michael Gould, Chairman and CEO of Bloomingdales, was quoted recently, “I want to be remembered for giving everyone an opportunity to be better than what they thought they could be.” In the best retailers, managers are the best leaders of people.
4. Match your shopfloor customer experience to your brand. A long time ago, top retailers realised that sales steps are old-hat. They don’t work! The customer can pick it a mile away, the team member feels awkward, but, in the absence of anything else, retailers still continue with this approach. Again, start with the customer in the middle and work out. For retailers selling products with loads of features, i.e. Best Buy, a more structured selling approach works, whereas for an experiential experience, i.e. Anthropologie, customers prefer to be left alone to browse. Match your strategy to the brand experience and the sales will follow.
5. Have a clear digital strategy and play in that space. I think by now, we all know two things related to digital in retail. First. Thanks to social media, mobile phones, etc, the amount of information available to customers has exploded. I mean exploded! And second. The mobile phone has now leapfrogged the Internet as the major communication tool with customers. Customers now commonly use their mobile phone to buy, check and compare prices, receive promotions, research product information and now identify in-store product locations. The best retailers hire the best people with digital talent – not just for brand/marketing roles – any roles. This is the way of the future and it’s time to tap into this market now. People with good digital experience are the new retail rock stars!
6. Markdown aggressively. Markdown all the way and right away. Customers learn very quickly that what you have now won’t be there in two weeks time. In the U.S right now, 68% of customers only buy apparel on sale compared to 18% that are prepared to buy at full price. One of Urban Outfitters strengths is that they have an open to buy every week of the year, which allows them to manage stock very differently to many of their competitors. Or Forever 21. Here is a successful retailer that doesn’t need to markdown. Their whole business model is based on GMROI – high stockturns x 35% margins – or selling $20 fashionable dresses to 14 year olds. What a story!
7. Attract, develop and retain people. I know it’s a cliché but it’s more relevant today than ever before. The best retailers, like B&Q, interview all the time even if there’s no role to fill. They work on the rule of two thirds of people are hired from within and one third from external. They focus on developing top talent through their world-class leadership academy, where people spend approximately 15% of their time on company initiatives and co-creating the future together. They also measure the engagement levels of their people, hold their managers accountable on the results and build the feedback in the development of their strategic plan.
8. Communicate to employees in a way that inspires and motivates. Lululemon Athletica in the U.S is an amazing success story. People that work at Lululemon Athletica are fanatical about their jobs – almost on par with employees of Apple. Each store gets a copy of their CEO’s favourite book collection to inspire them. Store teams are educated on how to interpret and improve their KPI’s and managers get only enough information to run their store – nothing more. Another retailer that has made organisational communication an art form is Burberry. Their annual celebrations of achievement unite everyone as a team. Through their quarterly live webcasts, twice yearly road shows and daily email blasts, their communication is personal, direct, emotive and connects their brand to team members.
9. Stay flexible. At the extreme level, Amazon, voted 2010 Oracle Global Retailer Of The Year, change their prices every 15-minutes, which makes them almost impossible to compete with. Or at Urban Outfitters, the VM team in-store have the discretion to buy something they like from a local market or from a friend who is a carpenter. Flexibility is also about not having a one-size fits all mentality. Different stores based on sales volume with different structures and different expectations around service delivery. It’s also about getting more creative with flexing VM depending on the time of the day.

Have a clear strategy on balancing physical store growth with online growth. It’s clear that the online retail revolution is here to stay. Unfortunately, just ask Borders. So, the question here is not whether your e-commerce site needs to generate significantly more online sales than your largest physical store. That’s a given. The question here is what happens to your physical stores. That’s the interesting piece. The best retailers in the world have already worked this out. Two quick points. First. Globally, the concept of flagship stores and large store footprints are trending down. And second. The retail store is still an integral part of the service experience. Don’t move away from the more traditional ways of service. In a recent study in the U.S. 50% of people said “there are many products for which there is no substitute to going to the store itself and seeing the product in real life. Online alone just doesn’t work”.