Eight characteristics of successful retail concepts
Tags: Consumer Behavior, Customer Service, Marketing
January 12, 2011
The holy grail of strategy for any firm, but especially retailers, is to create a concept that is so different and compelling that it renders competitors irrelevant — and then to implement that concept in such a way that core customers are bonded and the competitors find it hard to copy or react.
Innovative offerings from a variety of industries have attempted to create niches that were protected from competition. Brands such L.L. Bean, REI, Walmart, The Body Shop, Muji, Tokyo Hands, IKEA, Zara, H&M, Enterprise Rent-A-Car, Best Buy Geek Squad, Whole Foods Market, Subway (its low fat menu), Apple, Zappo's and dozens of others have been able to maintain a distinctive offering that attracts an extremely loyal customer base.
How? Are there any common characteristics that these brands share? Although each is different with respect to strategy and context, it is possible to observe some factors that are associated with successful new retail concepts. Not all are always present but there are cases in which the absence of even one can be fatal. The resulting eight guidelines are meant to be provocative.
* They have a clear vision
Firms with successful new retailing concepts tend to have a strong vision that connects to a core customer group. There is clarity around the offering, the identity of the target group, and the value proposition. All the brands noted above certainly have this quality. Enterprise-Rent-A-Car, for example, focused on the need to support the car repair industry with rental cars, which implies outlets spread throughout a city rather than having an airport focus, a system tied to insurance companies and repair shops, and an ability to deliver cars to users. Tokyo Hands is a one-stop store for the hands-on customer who wants the stimulation of a puzzle, a wood working product, or a decorating challenge.
There is a theory in marketing that if you connect with a core segment, as long as it is of reasonable size, you will tend to have not only a sales base but a clear message and a set of nodes that can communicate and advocate for your concept. A clear vision makes that connection.
* They evolve the offering
Most successful new retail concepts evolve over time, especially during the early days. They do not arrive out-of-the-box but benefit from changes, which can be refinements, or major changes in the vision. IKEA, Zappos.com, Best Buy, L.L. Bean, Whole Foods Market all started small in scope and ambition and expanded the vision as they got traction and found things that worked. IKEA discovered outsourcing assembly to customers when an employee had to remove the legs for a table to get it in a car. Zappo's changed from assortment to service as the key value proposition. Best Buy’s policy of serving customer rather than selling components was implemented over time. Pret-A-Manger, the enormously successful U.K. sandwich chain, refined the concept over five years when it was still a single storefront.
Retailers have a unique ability to experiment, try out many concepts with modest investments, and wait until one hits. The Limited tried out many concepts within an existing store and created chains such as Bath and Body Works and Structure out of those that showed promise. With different locations, experiments are doable not only to refine the concept but also to tweak it, keeping it fresh and ahead of competition.
* They execute
The main reason that new retailing concepts fail may be execution. The successful ones have been able to execute. That means they have been able to deliver the value proposition consistently and profitably.
The fast fashion pioneers, Zara and H&M, developed systems to conceive, create, make, and deliver products on a real time basis. Whole Foods Markets has the ability to source and handle organic foods. IKEA has footprints, a...
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