COLUMN
The Retail Chicken or
the Egg Conundrum
The age old question of “which comes first the chicken or the egg?” can be applied to
life in retail and is expressed as “which comes first the profit or the customer?”.
When I
commenced
retail in the 70’s
the strongest
principles
known and
understood
were “know
your
customer”
and “deliver
customer
service
excellence”.
As young
retailers we
were taught that
if all decisions
made were based on
Image source: www.colo-law.com
the customer needs,
(Merchandise team), and
providing customer service
excellence, (Store Operations), there would be
two critical outcomes: 1. Loyal customers and 2.
Sustainable Profit.
Retail observers today could be excused for
believing there is a conflict between “ideological
beliefs and practical performance delivery”. Whilst
it is fact that shoppers will be motivated to spend
their money in the retailer that best meets their
needs and delivers product and services within
their preferred environment, it is possible that the
business managers are driven by a different
operating concern and that is maximizing profits
immediately.
An alarming retail trend that would at least
appear to contrast with “the customer comes first”
mentality is the move in retail today into more
and more “self-serve” practices.
The reality of “ideological beliefs”.
The phrase “saying is easier than doing” is relevant
in retail. In previous reports we considered the
impact of time in retail which has continued to
drive the need to deliver bigger and faster results.
Owners, shareholders and the executive, now
more than ever before, demand financial results
faster.
The increase in sophistication and application of
technology has further increased the speed of
performance with performance data available to
everyone at the same time 24/7 and this results in
greater pressure to deliver immediate profit
results. Increased competition in players and
formats have also impacted on business decisions
as failure to make immediate changes within the
business can result in loss of customer traffic,
sales, profit and market-share.
Within the business it is easier to argue for change
that impacts on immediate profit than to argue
the belief that remaining loyal to a “customer
comes first” philosophy will longer term deliver
the strongest business foundation for sustainable
success.
The reality of “practical
performance”.
Shareholders invest to receive financial rewards
from dividends and unit price growth. It is not
hard to understand shareholders are driven by
fiscal reality with little – if any – emotional
connection to the customer experience despite
themselves being consumers.
Owners and operators of retail organizations
whilst able to talk about the philosophy of the
business are primarily motivated to generate the
highest levels of ROI. Speed of change is again a
big influencer on a retailer’s ability to stay
committed to the philosophical business beliefs.
Retail change is faster than ever before, and
competitor activity and customer behavior
demand a retailer responds “now” or risk the loss
of market-share, customer visit
frequency and spend value.
MARKET WATCH
by Darrell Wisbey
Darrell is a chief mentor and
retail advisor who has 30
years of retail experience
and has built a reputation
for being a leader who
interprets the market
accurately, define strategic
direction, and deliver
success by motivating,
developing and inspiring
teams to achieve continual
improvement
Conclusion for the Chicken (profit)
and the Egg (customer) conundrum.
A possible conclusion is there is no “first” and that
this is a conundrum because both are dependent
upon each other: without profit the retailer fails
and equally, without customers the retailer fails
so, the biggest challenge for the retailer is to
ensure all initiatives to increase profit that are
obvious to the customer and/or impact upon the
customer experience are equally offset by
initiatives that improve the level of shopping
satisfaction in experience, efficiency and
excitement.
So, I will return to the initial retail mantras:
“knowing the customer” and “deliver service
excellence” as it can be argued they are just as
relevant today as they were when back in the 70’s.
Customer Service is the same, but it
is also different.
Diminishing Loyalty.
Loyalty as experienced in the past
does not exist today as customers
are retail savvy, know there is
increased retail choice and are
motivated by, best price, biggest
savings, product availability, ease
of shopping and service
satisfaction. Failure to keep the
customer satisfied will result in a
change of customer destination.
Phase 1 of self-serve is customer selecting
product without assistance.
Supermarkets and mass merchants have
self-serve product selection and this is today
accepted by the customer as being preferable to
being “harassed” by overzealous service staff. The
self-serve trend, particularly in price sensitive
commodity formats, is to move further into the
“do it yourself” environment. The question here is
why is the retailer moving this way and how does
it impact on the business and the customer?
Phase 2 in self-serve is the customer completes
their own transaction.
The latest move is for the customer to complete
their own “check-out” process. It is hard to raise an
acceptable argument this is for the value of
customer service. You only have to stand in the
self-checkout locations to hear the negative
comments: why do I have to do the work for
them? … how do young people and students find
casual work if there are no more checkout
operators? …. why do I pay the same price for the
same item in the same store when I now perform
more of the retail tasks?
Just as eggs can be prepared with different
cooking techniques and produce a dish that looks
and tastes different, they are all still eggs. The
same thinking needs to be applied to determining
what constitutes customer service excellence in
the retail world today. Both retail formats and
customer behaviors are very different today than
in the past and will inevitably be different again in
the future. Whilst different they will all still be
defined as customer service.
The chicken or the egg challenge in
retail.
Given consumers think, expect and behave
differently today, in a world that is time critical
and where technology puts so much decision
making in our hands 24/7, the challenge for the
retailer is to identify and implement shopping
experiences that satisfy the meaning of “customer
service excellence” in the world of retail today. If
the balance of change is seen as a cold-blooded
assault on taking from the customer to increase
retailer profit then today’s shopper will become
cynical, more transient and less loyal.
Retailers to be ready to lead the market tomorrow
need to break the definition of current customer
service techniques and align the new definition
and implementation of service such to excite,
encourage and exceed customer expectations.
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