8 proven steps that will make your retail business successful
It’s shocking to see the number of retail stores that closed, for example in 2017. Radio Shack planned to close over 1,000 stores; other established retailers such as JC Penny, Kmart, Sears, Staples and Macy’s had plans to take similar action. These were established businesses with a history of loyal customers and decent profitability.
But they simply ran out of steam and couldn’t keep pace with the changes taking place in the industry. Buyer demographics and buying behaviours quickly change and retailers incapable of keeping pace die a slow and agonizing death — store by store by store…
There is no silver bullet — a single strategy — that will save a retailer in the current chaotic and unpredictable business environment, but there are some actions retailers can take to at least increase their chances of survival.
Renew your business strategy
It’s very tempting to take action and employ tactics that you think will help, but you need to start with redefining a strategy that you think will successfully meet the new dynamic.
The critical piece of thinking here is that you cannot assume what worked for you in the past will work in the future. I believe the main reason so many retailers fail is they almost religiously hold on to their past business model expecting it to work in an environment where literally every customer — competitor variable has changed.
In addition don’t get sucked into believing that cost cutting will save you. The retail death spiral is not a cost issue, it’s a demand issue. Cutting costs with the hope of salvaging the company has a perilous and inescapable outcome.
Do you really think that by closing over 1,400 stores Radio Shack will survive? Not unless they change their business strategy and figure out how to do a better job at serving customers and providing unmatched value in the marketplace.
Deliver value; don’t sell products
Look at your business as an instrument to deliver unique value, not as an agent to sell products and services. Think about being in the “benefit creation” business where what people want and desire drives the innovation process. The model of stacking the shelves — be it in a bricks and mortar environments or online — and having customers excitedly buy is wishful thinking.
And your retail value must be different that your competition because if you’re not different, you will fall victim to the commodity space where the value proposition for any retailer is reduced to price. Commodity market players “race to the bottom” with their prices much to the delight of the customers but to the detriment of the business as margins are squeezed and profits plummet.
As the telecommunications space was heating up with competition, we morphed our phone stores from outlets that offered telephones and accessories to residential customers to a solutions selling vehicle for both residential and small business customers. Product sales took care of themselves with this new focus.
Redefine who you want to serve
Change your target market. Demographics and psychographics are changing. Millennials are growing in number and will soon be the largest segment of the population. Continuing to target the older population, for example, because it has worked up to now is a choice with no long term future.
The question to ask is “Which customer group represents the greatest growth potential for our business?” Focus your energy on that group. Build capacity and competencies in your retail organization to satisfy the wants and desires of that group.
And say goodbye to customers who are no longer relevant to your renewed strategy. You can’t afford to hold on to your old base while pursuing a new one. Deselecting customers Is a difficult issue for most organizations as it means carefully shifting focus and investment away from customers who have traditionally been in the center of attention to a new breed who are unproven in terms of revenue generation.
Look for order of magnitude not incremental change
Minor changes to what you do and the way you do them won’t work; explore new completely different ways to completely morph your business. And consider outrageous ideas like the Heart Attack Grill in Las Vegas as well because the “traditional tried and true” approaches simply will not work anymore.
If your new retail idea doesn’t scare the hell out of you, chances are it’s too modest.
We completely reengineered our phone store network by closing almost half of them and reconfiguring the survivors geographically through our operating territory. This was anything but a modest change for which we took considerable criticism. But it was necessary in order to place our new “customer serving centers” closer to the customers we decided to target.
Recruit a new team
if your current retail strategy won’t get you where you need to go, probably your existing team won’t as well. Be prepared to change the composition of your teams and recruit new blood with the skills and competencies necessary to deliver your new direction. Look for disrupters who hate the status quo; people who will push for change.
HR must constantly be on the lookout for the new breed; they should constantly be in the recruitment mode regardless of whether you have immediate opportunities available or not. Sooner or later positions will open up, and you need a stream of people immediately at hand to draw on.
As the telecom business was changing from a monopoly to a highly competitive model, we had to purge much of the organization in terms of the skill sets and competencies in our people. We had to import a cadre of folks who had proven experience in the retail world and let go many who were effective order takers but not able to sell competitively.
Provide personalized service
As a critical element of your renewed strategy set your sights on providing more personalized service rather than the traditional one-size-fits-all doctrine. Retail success comes from engaging with and serving customers on THEIR terms, not on what the business deems appropriate given their internal constraints. If retail isn’t prepared to meet their customers on their turf, the game will be swiftly over.
We moved from a subscriber model in our phone stores to the strategy of creating more personal customer experiences for every person who came to our stores. One tactic we chose was to “make the inside mirror the outside”; in other words recruit employees that were integral to the mosaic of ethnic populations we served. So in an area where we had a significant Asian community, we hired frontline people and leaders who were also Asian and who could relate better to this customer group and serve them better than people with other ethnic backgrounds.
Service levels increased with productivity and we quickly outpaced our competition.
Build a leadership team of servers
Hand in hand with establishing a service culture is the need to move leaders from a traditional command and control bias to a serve and coach value system where “How can I help?” supplants “Do this!”.
Critical to providing a personal experience for customers, retail operations must do the same for employees. An employee who experiences a servant leader who is there to help solve problems and eliminate job barriers will naturally apply the same behaviour to a customer. They learn to be helpful to customers because they receive the same treatment from their colleagues and bosses.
In the same way we had to move away from customers we had traditionally targeted, we had as well to exit traditional command and control style managers to make way for people who were natural servant leaders.
Eliminate commission salespeople
Having commission salespeople is the anathema of the concept of serving customers and providing personalized solutions to their problems.
Employees who are paid to push retail product will flog their wares to, not serve, customers. They will push for the sale as opposed to taking whatever time it takes to problem solve with the customer. They will have zero motivation to create memorable experiences for their customer because it takes too much time, requires too much energy, and because they’re not getting paid to do it. Be prepared for an exodus of salespeople when you do this; they will look for opportunities to continue their flogging ways with other retailers. So let them.
Retail businesses can survive; all is not lost. But it will require retailers to put the past to rest and take action to break away from “the way they have always done things”.
Those that have the guts to do it have a chance of surviving; those that don’t will die.
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