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25 April 2014
There’s no more Simplicity - Retail Challenges in the 21st Century

There’s no more Simplicity - Retail Challenges in the 21st Century

By SalesProEd @ 05:47 :: 3438 Views :: 0 Comments :: Article Rating :: Featured Articles
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It is less than basic wisdom that the retailing landscape has significantly changed over the last 30 years. The evidence is obvious. Instead of the many individual shops, major retail chains dominate High Streets all around the world. But these High Streets have changed, too. Where once was a thriving and sustainable shop culture attracting many visitors, an increasing amount of empty shops decorate streets nowadays. Even those shops, which can be rented to new retailers have frequently been empty for a long time or often enough, they are empty again far too soon.

HMV or Comet is an example of those, which had run in troubles. HMV just survived, but the prediction is a very uncertain future. Comet remains closed. These are just two prominent brands in the UK to which many more can be added. On a different level the recent news that retailer Next has overtaken Marks & Spencer is another symbolic market signal. The ‘newcomer’ outperforms the traditionalist. That has happened and that will happen again. But one point is significant – the speed by which all these occurrences take place. There are many more such signals, which the hyper competitive marketplace sends predicting further significant changes, which are not sufficiently internalised by retailers yet.

Does all this mean that retailers fight a losing battle or that consumers do not want them anymore? Or do consumers completely change their habits and totally switch to online? Certainly not; but our own research concludes that the efforts for simple transactions being mainly supported by profit-swallowing sales are a lost battle. The influencing factors have mushroomed, in which changes of the consumer behaviour and the consumption pattern are one challenge only. All this is just the beginning and by far not the end.

Hence, when consumers change their consumption pattern, which new technologies facilitate more and more, and when new powerful entrants, mainly from Asia now, have to be expected, established retailers must change, too. But how? Definitely not anymore on the low operational level alone – at least tactical tools have to be adjusted and new, but true strategies need to be developed. This world is not anymore simplistic and industry-centred. This new world is cross-disciplinary, multifunctional and multilevel. This is what this paper reflects on.

Strategy and More

One constant factor has remained stable, the two sides of offer, the retailer, and demand, the consumer. It still is the same game of marketing products and to satisfy different and varying needs. This is the strategic part, precisely the level of sales strategy. What has significantly changed is the tactical level. The selection of those instruments achieving the sales strategic objectives.

Previous strategies in which retailers considered themselves as irreplaceable have become dangerous. It has become far too easy to replace or circumvent them. While sales strategy remains transaction focused, the higher strategic levels frequently need adaptation.

Al Ries expressed it perfectly, when he wrote about the battle of the mind, the erratic and unpredictable consumers’ minds. Our studies among the young generation are consistent here. Long-term ad-hoc tested students’ ranking of fast food chains; places 1 to 3 are robust: McDonalds, Burger King, KFC. For soft drinks it always is Coca Cola, Pepsi Cola and then it differs slightly for place 3. But as other blind tests proved, Pepsi Cola was the winner, when it came to taste.

The situation becomes different, when established consumers in focus groups were asked about tangible differences between the Jaguar XF, BMW 5, Mercedes E-class and the Audi A6. Very lively discussions started immediately. Many arguments were presented, but as our research has shown, none of these arguments were tangible, they were intangible – perception and mainly emotion driven.

A third study asked female consumers about the reasons, why they prefer TESCO, Sainsbury, Morrison or Waitrose and then these in contrast to LIDL, ALDI or ASDA. For the first, their major argument was time and convenience: lies on the way home from work or is the closest nearby were the two most often statements. Only when it came to ‘lower’ ranks, ALDI, LIDL and ASDA, there were rejections, since some of the female consumers considered them as low class. This led to two tangible arguments: distance and convenience. But this result demonstrates, too, that (now tactically) the many promotions are not triggering as much change as they targeted. Convenience and location outperformed lower prices. The other level – what we call class differentiation – is intangible again, the perception in the mindset.

In all three studies nowhere quality arguments were addressed. But there was a fourth short test regarding Debenham, Marks and Spencer, H&M and Next as four well located fashion shops (M&S Food was excluded). Here again, nothing about quality, just a few remarks on price levels, it was all about style and fashion, which significantly differed by age of the interviewee.

Neither we claim that these studies are representative, nor do we suggest that their results are offering new insights. To us they simply, but importantly confirm that retailers have a different perspective, than consumers. However, if retailers know all this well, why then can much smaller Next outperform bigger Marks & Spencer? Following the right strategy of winning consumers’ hearts and minds and able to inject many more resources Marks & Spencer should have been able to maintain the status quo intact.

Cross-disciplinary, Multifunctional and Multilevel

To us simplicity is a major argument. US researcher and consultant Keidel, supported by some other researchers, calls it point thinking. The managerial problematic to think in points: comfortable, i.e., good and easy for us and uncomfortable, i.e., not good for us. This is matrix thinking only. If it becomes difficult, Keidel suggests that linear thinking – shades of grey between white and black – starts.

Once more this is too simplistic, since neglecting Keidel’s well-argued dangerous negligence of the Variable C – the consumer. One central and over-simplistic matrix tool fully neglecting consumers is the marketing mix, created for a world, which (nearly) does not exist anymore.
Hence, our statement is that relying on the marketing mix is insufficient in the 21st century. As our studies above indicate, price alone is not sufficient. Promotion by price does not convince anymore. Immediately two of the four major Ps are taken out of the
equation. We may now argue with a more contemporary tool, the Fours A – acceptability, affordability, accessibility and awareness – which Sheth and Sisodia have introduced or consider Ogilvy and Mathers rather starchy four E – experience, everyplace, exchange and evangelism. But such tactical tools, if used alone, still remain too simplistic for 21st century retailing.

Nevertheless one emphasis is unanimously expressed, the marketing mix has become irrelevant. We consider it even deceptive.
Instead of the permanent sales attitude, which has become a poor weapon in the battle for consumers’ minds, sophisticated and refined stimulation is essential. We consciously excluded the online battle from this discussion, but one example is of interest: multilevel, e.g., in the form of multimedia. Star Wars R2D2 creator Tony Dyson[1],[2] uses avatars to present new fashion designs. This is attractive, this combines the virtual space with the physical place and, most importantly, this is where the young generation can be found and attracted and which it shares among peers.

This leads to psychology, here as part of cross-disciplinary tactics. With reference to the argumentation before, we emphasise that psychology is not only needed for the marketplace. Its application starts much earlier, inside retailers’ headquarters
persuading managers that much more than the next higher discount is necessary. The contemporary retail environment uses psychology since quite a while, but just fragmented. There is more than stimulating music or psychologically designed routes through a shop or supermarket. Sales are psychology. To trigger transactions, it needs sophisticated psychological stimulation, which may be found in the deeper meaning of experiential marketing: The experience, which today’s hyper-consumers want to share with peers. At the same time, McLuhan’s 50-year-old sentence, ‘the medium is the message’ can find a new meaning here. This means, e.g., that retailers’ sales management should be highly and widely trained in psychology.
Multilevel and multifunctional is even more. Experiential marketplaces creating desires are essential. The boring atmosphere, which still today many retailers offer is counterproductive. A simple place with shelves, fashion or perfumes in them – this does not win a consumer’s mind. French research has dug deep into this. “A place to be”,to experience an exciting atmosphere and environment. E.g., Kuala Lumpur’s thriving shopping malls excellently demonstrate what can be done and most importantly how.

This is a cross-functional effort, too. Kotler’s statement that the whole (retail) organisation must be a single minded marketing machine reaches far deeper as this sentence expresses in the first instance. To write just one academic sentence, this means that extrinsic stimulators need to be combined in perfection for resulting in intrinsic consumer desires. This is winning the battle for the consumer’s mind.

Psychology, marketing, sales and behavioural specialists are the contemporary marketing mix.

The Résumé

In this game there is only one winner. The retailer, which achieves the sale. Much speaks for Baker, who stated that consumers never knew what they want and never will. Apple is a formidable example for this. Steve Jobs created products, which did not exist before. But they became desires. What counts even more, no social difference, no age categorisation, and no other segmentation tool applied. All wanted (and many still do) these Apple products. Which was the last physical book creating a hype like Harry Potter? Was there any other since? Perception and desire are the ingredients attracting consumers to stores. Cheap prices? Everybody has them; they are cheap and isolated tools with no long-term effect. Likely they are despair and simplistic me-too behaviour of the side of offer. Getting to a point like Apple means that the side of demand does not pay much attention to price. This then is a must have.

Our conclusion is that retailing has a big need for a sophisticated and multilevel trained group of specialists being quite different to functional attribution, which presently exists. They must understand more than marketing, or sales, or psychology, or behaviourism. They must understand all of it. Supported by a team of specialists in each discipline, the multifunctional and cross-disciplinary retailer can outperform competition on many levels resulting in a sustainable custom.

Prof Dr Klaus Oestreicher
Academic Director
IPE Management School Paris

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